Germany is one of the most highly developed industrial nations in the world and, after the USA and Japan has the world’s third largest national economy. With a population of 82.5 million Germany is also the largest and most important market in the European Union (EU). In 2007, Germany’s gross domestic product (GDP) totaled EUR 2.423 trillion, which translates into per-capita GDP of EUR 29,455. This figure can be attributed primarily to foreign trade. With an export volume of EUR 969 billion in 2007 or one third of GDP in 2004, Germany is the biggest exporter of goods worldwide, and as such is considered to be the “export world champion”. The engine room behind this foreign trade is first and foremost industry, which accounts for some 84% (2004) of total Exports, making it more of a global player than almost any other country. The most important economic centers in the country are the Ruhr region (formerly characterized by heavy industry it is developing into a hub for high-tech and service providers), the Munich and Stuttgart conurbations (high-tech, automobiles), Frankfurt/Main (finance), Cologne, Hamburg (port, Airbus construction, media) and Leipzig.

As Germany is a so-called high-wage country, it is particularly important for German companies to be one step ahead of their competitors in terms of quality. To this end Germany currently commits around 2.5% of its GDP to research and development (R&D), considerably more than the EU average of around 1.9%. The Federal Government plans to increase spending on R&D to 3% of the country’s GDP by the year 2010. Moreover, following the USA and Japan, Germany spends the most private resources on R&D, namely USD 40 billion.

In 2004, over 18% of patents worldwide were registered in Germany alone. The country is likewise one of the leading nations as regards several of the technologies of the future that have exceptional growth rates. These include bio-technology, nano-technology, IT and the numerous high- tech divisions in individual sectors (aviation and aerospace, electrical engineering, logistics). Companies specializing in environmental technology (wind energy, photovoltaic power and biomass generation) have emerged as front runners. The German environmental technology branch (wind energy, photovoltaics, bio-mass) is also well established in international markets, with manufacturers of wind energy plants boasting a 50% share of the market. The 130,000 employed in the branch generated sales of EUR 11.5 billion. The companies are forecasting an annual growth rate of 10% until 2020 and are planning to invest EUR 200 billion. Almost 5% of total electricity production in Germany is already covered by wind energy; by 2010 the share of renewable energies in generating electricity is set to rise to 12.5%.

Germany has traditionally been a highly attractive country for Foreign investors not just because of its technological prowess, but also because of its central geographical location, its highly developed infrastructure, its stable legal system, and its well-qualified labor force. The tax reform of 2000 considerably reduced the tax commitments of companies as well as private individuals, making them competitive and putting them on a par with those of other countries. In order to make Germany even more attractive in terms of taxation, there are plans to reform corporate taxation laws with effect from January 1, 2008. Between 1994 and 2003 Germany saw direct investments totaling US$ 387 billion, including Major investments by groups such as General Electric and AMD. The labor force’s high level of qualifications is seen as an important plus point. Some 81% of those in employment have undergone formal training, and 17% hold a degree from a university or institute of higher education.

The German government does not directly interfere in the economy. The government provides various incentives, including investment grants and subsidies, tax incentives such as accelerated depreciation and financial assistance through long-term loans at favorable interest rates to assist certain territories and industries.