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Top German companies focused on export
THE ‘GERMAN MIRACLE’ IS STILL BASED ON ‘SOLIDARITY’ YET CORONA HAS ALSO STRUCK MERCILESSLY IN GERMANY The Federal Republic of Germany was formed on 24 May 1949. The German economy had been ruined by World War II, but soon started to revive just after the monetary reform of 1948. In 1962, there was even talk of full employment. This post-war period is known as the German Economic Miracle (‘Wirtschaftswunder’). In ‘East Germany’ the economy was less successful and, at the end of the 1980s, the German Democratic Republic (GDR) fell into terminal decline until the Berlin Wall fell on 9 November 1989. On 3 October 1990, both German states were reunited. What followed was an economic transition process which is still going on today.
Citizens also pay
Solidarity works
The German economy finally contracted by 2.2% in the first quarter of this year as compared to the previous quarter. This downturn was due to the corona crisis. With these final figures, the German federal statistics agency has confirmed previously issued estimates. The contraction corresponds to the average forecast by economists. In the fourth quarter of 2019, the gross domestic product of Europe’s biggest economy contracted by 0.1%, so the German economy is now officially in recession.
The German economic system functions as a social market economy (‘soziale Marktwirtschaft’). Former Minister of Economic Affairs Ludwig Erhard introduced this notion in 1948. He believed the market works well if the government ensures there is enough competition and sets preconditions for a just and social society. The German constitution stipulates that the market is bound by social limits. The social market economy finds expression in economic legislation and institutions such as the cartel ban; shop closing times laws; the independent position of the Federal Bank; the social security system; autonomy of employers and employees during pay negotiations.
Ultimate solidarity The federal structure of the Federal Republic largely determines financial affairs and public finances in Germany. The central government (‘Bund’), states (‘Länder’), and municipalities each account for a part of government expenditure. To facilitate an equal standard of living over the entire country, the rich states (particularly in the south) cede a portion of their income to the poorer states (especially in the east and north); this is referred to as state finance balance (‘Länderfinanzausgleich’). Apart from this horizontal budgetary settlement, Germany also has a vertical settlement (from the central government to the states). Due to the former division of Germany, the economy in the west had developed completely differently to that in the east.
After the reunification in 1990, the government had to invest several billions. Since 2005, the Solidarity Pact II (‘Solidarpakt II’) has been in force, which stipulates that the German government will make 156.5 billion euros available for East Germany until 2019. In addition, all German citizens pay a solidarity supplement, a percentage of their income, to help cover the cost of reunification. Economically, the region of the old GDR still trails that of Western Germany. Unemployment there is considerably higher, although there has been some progress in recent years. In 2013, unemployment in Western Germany was 6%, whilst it was 10.3% in Eastern Germany.
2020: Corona strikes!
Dramatic contraction The statistics agency had already announced that the contraction was the biggest since the financial crisis of 2009. Consumer spending fell by 3.2%. That fall was the biggest ever recorded. Due to the uncertainty of the situation and the closure of many shops and catering establishments, the Germans have cut back their spending. Moreover, companies have invested noticeably less in machines, vehicles, and other equipment. Government spending rose by 0.2% and there was more investment in the building industry. According to press agency DPA, this helped to avert a more severe decline.
The storm isn’t over yet Forecasts suggest the German economy will suffer even more in the second quarter of 2020. In the first quarter, corona measures were only in force for a few weeks. To counter the negative impact of the crisis on the economy, the German government has announced extensive support packages for companies.
EPLF adopts a new mission, vision and logo in 2020 Announced in January 2020, the new mission, vision and logo of EPLF, the association of European Producers of Laminate Flooring, was released last July. The organisation’s mission aims at ‘raising awareness about the benefits of laminate flooring and representing the interests of the European producers of laminate flooring’. In addition, EPLF’s vision to ‘enable a sustainable laminate flooring industry’ translates the ambition to support members in continuously improving the sustainability and circularity of their products and processes. These mission and vision are supported by the new logo ‘Made with wood” tagline which reflects the sustainability, renewability and circularity of laminate floorings’ raw material. The new logo is a quality-stamp for products made in Europe that respect the highest European quality and environmental standards (See the EPLF infographic). For more information: www.eplf.com
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