Table of Contents
|Location and Size||Credit and Collections|
|Legal System||Business Climate|
Location and Size
Located in the heart of Western Europe bordering the Baltic and North Seas, Germany’s land area is 357,114 sq. km (approximately the size of the U.S. State of Montana).
Federal republic. The German democratic constitution emphasizes the protection of individual liberty and division of powers.
- Executive: President (titular chief of state) Frank Walter STEINMEIR (since March 2017), chancellor (executive head of government/prime minister) Olaf SCHOLZ (Since December 2021)
- Legislative: Bicameral parliament
- Judicial: Independent
The legal system is a civil law system with indigenous concepts. Germany has not accepted compulsory International Court of Justice (ICJ) jurisdiction.
Germany has an independent federal judiciary consisting of a constitutional court, a high court of justice, and courts with jurisdiction in administrative, financial, labor, and social matters. The highest court is the Bundesverfassungsgericht (Federal Constitutional Court), which ensures a uniform interpretation of constitutional provisions and protects the fundamental rights of the individual citizen as defined in the Basic Law.
Germany has one of the world’s highest levels of education, technological development, and economic productivity. Since the end of World War II, the number of youths entering universities has more than tripled, and the trade and technical schools of the Federal Republic of Germany are among the world’s best.
- Population: 79,903,481
- Population growth rate: -0.21%
- Languages: German (official). Danish, Frisian, Sorbian, and Romany are official minority languages.
- Literacy: 99%
- Ethnic Make-up: German 86.3%, Turkish 1.8%, Polish 1%, Syrian 1%, Other 8.9%
- Religions: Roman Catholic 26.7%, Protestant 24.3%, Muslim 3.5%, unaffiliated or other 45.5%
Germany is the world’s fourth-largest economy and the largest in Europe. As Europe’s largest economy and second most populous nation (after Russia), Germany is a key member of the continent’s economic, political, and defense organizations.
Germans often describe their economic system as a “social market economy”. The German Government provides an extensive array of social services. The state intervenes in the economy by providing subsidies to selected sectors and by owning some segments of the economy, while promoting competition and free enterprise. The government has restructured the railroad system on a corporate basis, privatized the national airline, and is privatizing telecommunications and postal services.
In terms of foreign policy, Germany is has adopted a interventionist policy and asserts its leadership over Europe. Germany has played a leading role in the management of the Greek crisis.
The German economy remains in the lower reaches of the mostly free ranks again in 2021. The potential for greater economic freedom is stymied by systemically high government spending as well as costly and rigid labor laws. Unfortunately, government spending is likely to increase rather than decrease in the near future.
Currency: Euro (EUR)
Leading Markets (2021): US 9%, France 8%, China 7%, Netherlands 6%, UK 6%, Italy 5%, Poland 5%, Austria 5%
Leading Exports – Commodities: Cars and vehicle parts, packaged medicines, aircraft, medical cultures/vaccines, industrial machinery.
Leading Suppliers (2021): Netherlands 9%, China 8%, France 7%, Belgium 6%, Italy 6%, Poland 6%, Czechia 5%, US 5%
Leading Imports – Commodities: Cars and vehicle parts, packaged medicines, crude petroleum, refined petroleum, medical cultures/vaccines.
Top Industries: Among the world’s largest and most technologically advanced producers of iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, food and beverages, shipbuilding, textiles.
Top Agricultural Products: Potatoes, wheat, barley, sugar beets, fruit, cabbages; cattle, pigs, poultry.
Comparative Economic Indicators – 2021
|Population growth rate (%)||-0.21||0.33||0.09||0.48||0.32||0.37|
|GDP PPP** (USD Bn)||4,238.8||2,832.2||2,322.1||2,797.9||461.1||945.5|
|GDP per capita PPP** (USD)||50,900.0||42,000.0||39.000.0||41,600.0||51,900.0||54,200.0|
|Real GDP growth rate||0.59||1.49||0.34||1.26||1.42||1.63|
|Unemployment rate (%)||4.98||8.12||9.88||3.17||7.35||3.41|
|Exports (USD trillion)||1.671||.746||.558||.741||.226||.719|
|Imports (USD trillion)||1.452||.803||.486||.752||.211||.622|
|Reserves of Foreign Currency & Gold
|Exchange rate per USD on 1-14-2022||0.88||0.88||0.88||0.73||0.88||0.88|
* 2021 estimates
** PPP ” Purchasing Power Parity[Table of Contents]
Credit and Collections
Standard payment instruments such as bills of exchange and checks are not used very widely in Germany. For Germans, a bill of exchange implies a precarious financial position or distrust on the part of the supplier. Checks are not considered a payment as such but a “payment attempt”. As German law ignores the principle of covered checks, the issuer can cancel payment at any time and on any grounds, making bounced checks fairly common.
Bank transfer is the most common means of payment. Leading German banks are connected to the SWIFT network, which enables them to provide a quick and efficient funds transfer service.
In 2014 a law was passed called Rechtsdienstleistungsgestez or RDG, which states that collection efforts against German customers must be done by a German agent. This makes it necessary for any collection agency outside of Germany to obtain a German partner.
The collection process begins with the customer being sent a final demand for payment. If payment or an out-of-court settlement is not forthcoming, the creditor must initiate court proceedings.
Provided a claim is payable and uncontested, the creditor can seek an injunction to pay through a simplified and inexpensive procedure involving the use of pre-printed forms accompanied by the documents supporting the claim. A writ of execution follows fairly quickly thereafter.
Foreign creditors must file their claim with the Schoneberg Court in Berlin, which may deliver an injunction to pay. The customer is given two weeks to make payment or challenge the injunction.
Ordinary legal proceedings tend to be oral, with the judge reaching his decision on the arguments presented by both parties present in court. If the case is contested, the judge hears the litigants or their lawyers and asks them to submit evidence, which he alone is authorized to assess. Each litigant is also requested to submit, within the specified time limit, a pleading memorandum outlining his or her expectations.
Once the claim has been properly examined, a public hearing is held at which the court hands down a judgment.
Germany is a member of the International Center for the Settlement of Investment Disputes (ICSID), as well as a signor of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. German courts are fully available for foreign investors in the event of investment disputes. The government does not interfere in the court system and accepts binding arbitration.
Coface Country Rating: A2 — The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.
Coface Business Climate Rating: A1 — The business environment is very good. Corporate financial information is available and reliable. Debt collection is efficient. Institutional quality is very good. Intercompany transactions run smoothly in environments rated A1.
Credendo Political Risk Rating: 1 – Lowest risk (1-7)
Credendo Commercial Risk Rating: C – Moderate risk (A, B, C)
Despite persistence of some structural rigidity in the labor market and extensive government regulation, the economy remains strong and internationally competitive. Although production costs are very high, Germany is still an export powerhouse, and unit labor costs have decreased in the last decade. Germany is also strategically placed to take advantage of the rapidly growing central European countries.
Market Access: Germany is a major trading partner for many countries throughout the world, and the most important single market in the European Union. Almost everyone wants to be active in this market and stiff competition exists among many, almost identical, products and services.
Transparency of Regulatory System: Germany has transparent and effective laws and policies to promote competition, including anti-trust laws. Laws and regulations in Germany are routinely published in draft and public comments are solicited. The legal, regulatory, and accounting systems can be complex but are transparent and consistent with international norms. New rules have simplified bureaucratic requirements, but industry must sometimes contend with officials’ relative inexperience with deregulation and lingering pro-regulation attitudes.
Property Rights: The German government adheres to a policy of national treatment, which considers property owned by foreigners as fully protected under German law. There is almost no discrimination against foreign investment and foreign acquisition, ownership, control or disposal of property or equity interests, with airline ownership being an exception. Secured interests in property, both chattel and real, are recognized and enforced.
Intellectual property is well protected by German laws. Germany is a member of the World Intellectual Property Organization (WIPO). Germany is also a party to the major international intellectual property protection agreements.
National treatment is granted foreign copyright holders. Germany has signed and ratified the WIPO Internet treaties. Foreign and German rights holders, however, remain critical of provisions in the German Copyright Act that allow exceptions for private copies of copyrighted works. Most rights holder organizations regard German authorities’ enforcement of intellectual property protections as comprehensive, although problems persist due to lenient court rulings in some cases and the difficulty of combating piracy of copyrighted works on the Internet.
Economic Freedom: The Heritage Foundation’s 2021 Index of Economic Freedom ranks Germany as the 29th freest in the world, scoring it 72.5% free. Germany ranks 16th out of the 45 countries in the European region and its overall score is significantly higher than the world average.
Corruption: Among industrialized countries, Germany ranks 9th out of 180 countries, according to Transparency International’s corruption index. The construction sector and public contracting, in conjunction with undue political party influence, represent particular areas of continued concern. Nevertheless, U.S. firms have not identified corruption as an impediment to investment.
The German government has sought to reduce domestic and foreign corruption. Strict anti-corruption laws apply to domestic economic activity and the laws are enforced.
Extremist Violence: Economic uncertainty in eastern Germany is often cited as one factor contributing to extremist violence, primarily from the political right. Confusion about the causes of the current hardships and a need to place blame has found expression in harassment and violence by some Germans directed toward foreigners, particularly non-Europeans. The vast majority of Germans condemn such violence.
Germans do not need a personal relationship in order to do business. Rather, following the established protocol, your academic credentials and the amount of time your company has been in business is critical to building and maintaining business relationships.
Greetings: Greetings are formal – a quick, firm handshake.
Business Attire: Business dress is understated, formal and conservative. Men should wear dark colored, conservative business suits. Women should wear either business suits or conservative dresses. Ostentatious jewelry or accessories is frowned upon.
Names and Titles: Titles are very important and denote respect. Use a person’s title and their surname until invited to use their first name. You should say Herr or Frau and the person’s title and their surname.
Conversation: German communication is formal. Maintain direct eye contact while speaking.
Gifts: A small gift is polite, especially when contacts are made for the first time. Substantial gifts are not usual, and should not be presented before a deal is reached if you don’t want your intentions to be misinterpreted. Even small souvenir-style gifts to thank local staff for their assistance and hospitality will not be expected, but will always be appreciated. Avoid giving substantial gifts in private. The larger the gift, the more official and public the giving should be.
Meetings: Appointments are mandatory and should be made 1 to 2 weeks in advance. Arriving even 15 minutes late is a very serious faux pas and could mean a very shaky start to any business relationship. If you expect to be delayed, telephone immediately and offer an explanation.
Meetings are generally formal. Initial meetings are used to get to know each other, allowing your German colleagues to decide if you are trustworthy. Meetings adhere to strict agendas, including starting and ending times. There is a strict protocol to follow when entering a room: the eldest or highest ranking person enters the room first; men enter before women, if their age and status are roughly equivalent.
Negotiations: You must be patient and not appear ruffled by the strict adherence to protocol. Germans are detail-oriented and want to understand every innuendo before coming to an agreement. Decision-making is held at the top of the company. Avoid confrontational behavior or high-pressure tactics as they can be counterproductive.
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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries. For further information, contact [email protected].
Historical Exchange Rates: OANDA.com The Currency Site.