Germany - Economic development



Outside of transportation, communications, and certain utilities, the government has remained on the sidelines of entrepreneurship. Beginning in 1998, and in line with EU regulations, the German government began deregulating these fields as well. It has, nevertheless, upheld its role as social arbiter and economic adviser. Germany considers itself a "social market economy." Overall economic priorities are set by the federal and Land governments pursuant to the 1967 Stability and Growth Act, which demands stability of prices, a high level of employment, steady growth, and equilibrium in foreign trade. In addition to the state, the independent German Federal Bank (Bundesbank), trade unions, and employers' associations bear responsibility for the nation's economic health. With the advent of the euro in 1999, much of the Federal Bank's authority in monetary matters was transferred to the ECB. In the international arena, Germany has acted as a leader of European economic integration.

Government price and currency policies have been stable and effective. Less successful have been wage-price policies, which have been unable to control a continued upward movement. Inflationary pressures have increased and combined with a general leveling off in productivity and growth. Attempts to neutralize competition by agreements between competitors and mergers are controlled by the Law Against Restraints of Competition (Cartel Act), passed in 1957 and strengthened since then. The law is administered by the Federal Cartel Office, located in Berlin.

Unemployment remained at an average 9% in the early 2000s; it was twice as high in eastern Germany as in western Germany. Although much effort has been expended to integrate the former East German economy with the West's (infrastructure has improved drastically and a market economy has been introduced), progress in causing the two economies to converge slowed in the late 1990s and early 2000s. Germany's economy was moribund in 2003, and Chancellor Schröder was chaperoning income tax cuts in an attempt to revive it. The tax cuts were to be financed by further spending cuts. In 2003, Germany had the lowest growth in the EU for the previous three years—on average 1%—and the economy was in a recession in late 2002 and early 2003. In 2002 and 2003, Germany surpassed the EU's Stability and Growth Pact ceiling of a 3% deficit. Schröder championed his "Agenda 2010" series of economic reforms, including an easing of job protection, a reduction in unemployment and health care benefits, and a relaxation of the rules on collective bargaining.

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anna
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Jan 14, 2011 @ 9:09 am
this for your economics project which is due on wed :)

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