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economy of germany

Germany possesses the world's third most technologically powerful economy after the US and Japan. While exports remain strong, the local market of the basically capitalistic economy has started to struggle under the burden of generous social benefits. Structural rigiditiesólike a high rate of social contributions on wagesóhave made unemployment a long-term, not just cyclical, problem, while Germany's aging (and often involuntarily early-retired) population has pushed social security outlays to exceed contributions from workers. Both employers' associations and unions are increasingly deeply entrenched. After many failed starts, and continued unrelenting lobbyist attempts to mold government in their image, the word "reform" has acquired such a bad name among the population that the government has a hard time getting anything at all done.

The integration and upgrading of the eastern German economy remains a costly long-term problem, with annual transfers from the west amounting to roughly $100 billion without conditions in the East actually improving after 1997. Some economists have started saying that the transfers hurt more than they help since they don't encourage the East to get out of the slump by its own effort, while at the same time preventing dearly-needed infrastructure investment and upkeep in the West. There are still almost no internationally renowned companies headquartered in the East, most have only established subsidiaries

Since the end of WWII the government is making efforts to integrate more and more with France, both economically and politically, to form what is today called Franco German locomotive. This alliance is the basis of what is called the "core" countries in favour of greater integration of the European Union.

The recent adoption of a common European currency and the general political and economic integration of Europe including the eastward expansion of the European Union are thought to bring major changes to the German economy in the early 21st century.