Germany

Germany:
ECONOMY
The German economy--the fifth-largest in the world in purchasing power parity (PPP) terms and Europe's largest--is a leading exporter of machinery, vehicles, chemicals, andhousehold equipment and benefits from a highly skilled labor force. Like its Western European neighbors, Germany faces significant demographic challenges to sustained long-term growth. Low fertility ratesand declining net immigration are increasing pressure on the country's social welfare system and have compelled the government to undertake structural reforms. The modernization and integration of theeastern German economy--where unemployment can exceed 20% in some municipalities--continues to be a costly and long-term process, with total transfers from west to east amounting to roughly $3 trillionso far.

In 2011, gross domestic product grew by 2.7%. The country’s export-dependent economy is growing more quickly than the eurozone average. In 2010, gross domestic product grew by 3.6%, andthe German economy experienced its strongest rate of growth since reunification. Domestic demand is becoming a more prominent driver of growth. The German labor market also showed a strong performancein 2010 and 2011, with the unemployment rate dropping to 5.5% in October 2011. Economists attribute the decrease in unemployment to structural reforms implemented under the government of formerChancellor Gerhard Schroeder and to the use of government-sponsored "short-time" (Kurzarbeit) work programs. The German economy so far has been largely unaffected by the sovereign debt crisis in theeurozone, but a recession or slowdown of Europe’s largest economy is expected for the winter half of the 2011-2012 year, mostly due to declining exports to the country’s European partners.

The EuropeanUnion (EU) gave Germany until 2013 to get its consolidated budget deficit below 3% of GDP, and the government’s 4-year fiscal consolidation program worth approximately €80 billion (U.S. $109.6 billion)...