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In-depth PESTLE Insights
Publication Date: May 2009

This profile analyzes the political, economic, social, technological, legal and environmental structure in Germany. Each of the PESTLE factors is explored on four parameters: current strengths, current challenges, future prospects and future risks.

Key findings
Germanyboasts a strong democracy but suffers from strained relations with neighboring economies Germany has a robust democratic setup, and its elections are considered to be fair and transparent. In 2007, the country ranked in the 94.7 percentile in terms of voice and accountability, according to the World Bank's governance indicators. Voice and accountability measures the extent to which a country's citizensare able to participate in selecting their government, as well as freedom of expression, freedom of association, and the availability of free media. This high ranking therefore indicates the stability of Germany's democracy. In comparison, in the same year, France and Italy ranked much lower in the 91.3 and 86.5 percentiles, respectively. Furthermore, Germany’s percentile rank in terms of voiceand accountability has been increasing steadily since 1998. Despite its own stable democracy, however, Germany suffers from uneasy relations with its neighbors. Finance minister Peer Steinbrueck has accused neighboring countries Liechtenstein, Switzerland and Luxembourg of aiding and abetting German tax evaders, criticizing the bank secrecy which prevails in these countries. The finance ministeralso condemned the fact that these countries did not attend a conference on tax havens in Paris in October 2008. This war of words has lead to comparatively strained relations with Luxembourg and Switzerland. Moreover, the finance minister's remarks have caused internal conflict within Germany, with the opposition parties quick to criticize. Germany faces deeper recession and a fall in trade in 2009but the economy remains highly competitive Having contracted by around 2% in the last quarter of 2008, historically its severest quarterly decline, the German economy

Germany: Country Analysis Report – In-depth PESTLE Insights
© Datamonitor. This brief is a licensed product and is not to be photocopied

Published 05/2009 Page 1


is expected to fall deeper into recession in2009. Germany’s real gross domestic product (GDP) growth slowed in 2008 to 1.3% due to the appreciation of the euro and lower domestic demand. Datamonitor forecasts indicate that the country’s GDP is expected to shrink by 2.3% in 2009. The German economy’s strength lies in its strong research and development (R&D) expenditures and innovation orientation of its business firms. Meanwhile, thecountry's trade performance declined somewhat in 2008 from its remarkable performance in 2007, when it reached an all time high. The total surplus in trade of goods and services decreased to around $230 billion in 2008 from $234 billion in 2007. This high surplus, despite having fallen slightly since 2007, indicates the highly competitive nature of the German economy. Germany's economy is particularlydependent on exports. However, a decline in demand from the country’s major trading partners resulted in a substantial fall in economic activity in the last quarter of 2008 and into 2009. As such, Germany’s exports are expected to be adversely impacted in 2009. Germany performs well on social indicators but an aging population is an increasing burden on the economy Germany has performed well onvarious social parameters, mainly because of the socialist policies it followed in the 1950s and 1960s. The Human Development Index (HDI) for Germany was 0.935 during 2005, ranking it 22nd out of 177 countries. Life expectancy in the country at birth is around 79 years, while the combined primary, secondary and tertiary gross enrolment ratio was 88%. Germany also fares well in terms of gender...