Germany is affirming its position as one of the driving forces in the global economy. Having successfully navigated a stretch of rocky road, Europe’s economic engine crossed the 2006 finish line with a robust growth rate of 2.5%. Growth in productivity and business confidence and decline in unemployment, coupled with the country’s deficit reduction, all indicate a booming German economy. These are encouraging signals for potential investors.

Nearly 22,000 foreign companies already have a presence in Germany, including most major global players. They employ three million people and contribute about €1000bn to the economy. Investors profit not only from economic and political stability, but also from a strategic location, excellent infrastructure, highly qualified workers and moderate labour costs.

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The strengthening of economic fundamentals in Germany has led to a strong and steady rise in business confidence. Data from the Munich-based Institute for Economic Research (IFO) confirms that business confidence in Germany is approaching its highest level in 15 years. This is reflected in the number of companies intending to expand their domestic corporate investment. An IFO survey commissioned by German business magazine Wirtschaftswoche showed that nearly 40% of businesses in the country plan to increase their investment this year. Further evidence for the growing confidence in the German economy is the upward revision of the growth forecasts by several major economic institutions.

The German economy is gathering momentum and surpassing expectations in a number of key areas. Exports are growing. The world’s largest exporter of goods managed to raise its export volume last year by more than 12% and further growth is forecasted this year. The chemicals and automotive industries are anticipating a particularly strong demand for products made in Germany.

Germany’s economy is continuously being shaped by the power of innovation. The patent registration levels remain consistently high. The country ranks in the top three worldwide in scientific publications. More than 366 colleges and universities are located in Germany, above the average number of educational institutions in any European country. Of these, 167 are universities of applied sciences.

High-tech strategy

In August 2006, the Federal Government approved an ambitious long-term plan to push Germany to the forefront by identifying ‘the markets of tomorrow’. The plan, known as the ‘high-tech strategy’, is a result of co-operation between several Federal ministries. Through this strategy, the government is awarding €6bn to support groundbreaking research and innovation for the current legislative period (2006-2009).

Germany has emerged as a world leader in the renewable energy field, specifically in the sector of solar energy and photovoltaics – the result of efforts made by the government and the private sector in the past decade. It is now acknowledged as a major success story – a clear example of a ‘market of tomorrow’.

Tax reform

To induce foreign and local investment in Germany and to improve the competitiveness of established companies, the Federal Government has passed a major corporate tax reform. Effective from January 1, 2008, the average tax charge will be reduced by approximately 9 percentage points. Through these measures, the government seeks to reduce the tax burden for businesses and make Germany a more attractive and transparent place for global investors.

Germany is Europe’s leading economy both in terms of GDP and population. Its superb central geographical location facilitates access to European markets in all directions. For globally active companies, Germany offers a competitive and forward-looking environment. It is a country ready to face the challenges of the future and help your business succeed.