Sven Eppert 21 May 2003 Warsaw School of Economics CorporateStrategy Marcin Wojtysiak-Kotlarski, Ph.D. Country Report GERMANY

Sven EppertCountry Report Germany 21 May Overview 2.Political environment 3.Economic environment 4.Social environment 5.Technological environment 6.Summary Agenda

Sven EppertCountry Report Germany 21 May Germany in figures  Area: 356,970 km 2  Population: 82.4m (i.e. 231/km 2 )  Main Cities: Berlin (3.4m), Hamburg (1.7m), Munich (1.2m)  GDP: 1,984bn EUR (2002)  Inflation: 1.0% (April 2003)  Unemployment rate: 10.8% (April 2003) Overview

Sven EppertCountry Report Germany 21 May Overview 2.Political environment 3.Economic environment 4.Social environment 5.Technological environment 6.Summary Agenda

Sven EppertCountry Report Germany 21 May  Federal Republic of Germany (constituted of the united Germany on 3 October 1990)  3 levels of government: -Federal: bicameral with the Bundestag (Federal Assembly) and the Bundesrat (Federal Council)  both responsible for national laws, e.g. taxation -States (Laender): own constitutions, governments and parliaments - running of own facilities, e.g. education and hospital -Local: relatively large power (e.g. levy business tax) System of government Political environment

Sven EppertCountry Report Germany 21 May  Main parties: SPD, CDU/CSU, Greens, FDP and PDS  Social democratic-Greens Party coalition since October 1998 led by chancellor Gerhard Schroeder (small majority since 2002)  Great influence of the opposition in the Bundesrat Bundestag Political parties Political environment

Sven EppertCountry Report Germany 21 May  Budget deficit (Maastricht treaty reference) -Tax outfall (126bn EUR till 2006) -Rising of taxes, e.g. tobacco tax by 1 EUR  Unemployment  Social system costs (Health, pension and unemployment insurance)  "Agenda 2010" introduced by Schroeder in March 2003: Broad reform package for the labour market, social system, economy, finance and education  Nevertheless likely that the current coalition remains in power till 2006 Outlook Political environment

Sven EppertCountry Report Germany 21 May Overview 2.Political environment 3.Economic environment 4.Social environment 5.Technological environment 6.Summary Agenda

Sven EppertCountry Report Germany 21 May GDP growth Economic environment Source: Federal Statistical Office Germany. Quarterly % change on the previous year (at prices from 1995)

Sven EppertCountry Report Germany 21 May Consumer price index Economic environment Source: Federal Statistical Office Germany. Change in % (Index 100 = 2000, seasonally adjusted value)

Sven EppertCountry Report Germany 21 May Unemployment Economic environment  Unemployment rate (total): 10.8%, i.e. 4.5m (April 2003)  Old states: 8.6%, i.e. 2.8m (Trend:  )  New states: 19.1%, i.e. 1.7m (Trend:  )  Rising long-term unemployment (currently: 1.5m) Source: Federal Statistical Office Germany. Unemployed (in 1,000)

Sven EppertCountry Report Germany 21 May Comparative economic indicators, 2001 Economic environment Sources: Economist Intelligence Unit, Country data. GermanyFranceUKUSJapan GDP (US$ bn)1,8471,311,42410,2084,148 GDP per head (US$)22,50522,05523,83236,22232,776 Consumer price inflation (av; %) Exports of goods fob (US$ bn) Imports of goods fob (US$ bn) , Trade surplus (US$ bn)

Sven EppertCountry Report Germany 21 May EUR/USD Economic environment Source: Finanztreff.de.

Sven EppertCountry Report Germany 21 May  Companies with sales less than 50m EUR and employees less than 500  Share of the Mitttelstand among the -Companies (2000): 99.7% -Turnover (2000): 43.2% -Employment (2000): 69.7% -Gross value added (1999): 48.8%  Great importance for the German economy "Mittelstand" Economic environment Source: IFM, Bonn.

Sven EppertCountry Report Germany 21 May Trends Economic environment  2 nd largest export country in the world But  Remaining strong EUR reduces growth  Tax burden still high, e.g. non-wage labour costs of about 50%, and constrict investments  Large influence of labor unions  Tumbling world economy  0.2% decrease of GDP of in Q1/2003 enforces speculation of a recession

Sven EppertCountry Report Germany 21 May Overview 2.Political environment 3.Economic environment 4.Social environment 5.Technological environment 6.Summary Agenda

Sven EppertCountry Report Germany 21 May  Population: 82.2m -Shrinking to 78m (2030) and 70m (2050)  Ageing population  Falling fertility  Growth: 0.26% (2002 est.)  Immigration policies (currently 8.9% foreigners) Demographic structure Social environment Source: Federal Statistical Office Germany.

Sven EppertCountry Report Germany 21 May Social system costs Social environment Source: FAZ.net.

Sven EppertCountry Report Germany 21 May Overview 2.Political environment 3.Economic environment 4.Social environment 5.Technological environment 6.Summary Agenda

Sven EppertCountry Report Germany 21 May  World's most technologically advanced telecommunications systems  Internet user: 32.1m (2002)  eCommerce growth held back by privacy issues and concerns about credit-card security -EIU e-readiness ranking (2003): 13 th (out of 60)  R&D is well developed, but has a lack of competitiveness in high-tech eCommerce and Technology Technological environment

Sven EppertCountry Report Germany 21 May Overview 2.Political environment 3.Economic environment 4.Social environment 5.Technological environment 6.Summary Agenda

Sven EppertCountry Report Germany 21 May  "Agenda 2010" is unlikely to pass without major changes under the pressure groups  Recessionary tendencies in 2003  IMD World Competitiveness Ranking (2003): 5 th (previous year ranked 4 th )  Immediate sharp reforms and another attitude to our problems are needed Does Germany remain the sick man in Europe? Summary