Germany: An Overview

The history of 20th century Europe is marked by two World Wars, a holocaust, numerous genocides and considerable civil unrest, and today’s Germany has been heavily shaped by the history of the continent. The process of reunification that began with the fall of the Berlin Wall in 1989 is far from complete.

The immediate effect of merging the former East and West Germany after the fall of the Berlin Wall was to plunge the new state into a deep recession. The former countries had similar economies, reliant on industry and engineering. The East German economy, with lower levels of productivity, was decimated after reunification by policies that included the enforced parity of the two currencies. Such policies left a legacy of high unemployment in the “new states” which still persists today, reaching 14.7 percent by the latest figures. Meanwhile, West Germany’s economy struggled under the burden of the estimated 1.5 trillion euro costs of reunification. By the early years of the new millennium, with growth still stagnant and unemployment levels at record highs across the country, some critics in both East and West Germany began wondering whether the whole idea of reunification had been such a good one after all.

In this atmosphere, the Social Democrat/Green coalition government led by Gerhard Schröder pushed through a series of reforms, which deregulated the employment market and slashed benefits. By 2005 however, unemployment in Germany had reached a record high of 12.6 percent, the highest in Europe since the 1930s, and new elections were called.

A “grand coalition” of the two big parties, the centre right partnership of the CDU (Christian Democratic Union) and CSU (Christian Social Union), and the Social Democrats, took over after the 2005 elections. Everyone expected the new chancellor, Angela Merkel, to accelerate the reforms of her predecessor and act like a German version of 1980’s-era Conservative British Prime Minister Margaret Thatcher. This would involve her transforming the backwards and old-fashioned Germany into something more like the thrusting, go-ahead Anglo-Saxon economies. However, such reforms did not materialise and gradually it began to appear that the modern, tough and deregulated economies, particularly that of the UK, weren’t quite all they had been cracked up to be, as growth stalled and the extent of the property bubble became clear. Germany’s growth

Meanwhile, Germany had managed to slowly increase its growth and edge down unemployment, despite still carrying with it the weight of reams of employment regulation. Suddenly, talk was no longer of pushing forward with reforms, but rather of how much to scale back the “Hartz IV” welfare reforms of the previous SPD/Green government, with all parties agreeing, for example, that older unemployed people should be able to continue to claim the more generous older benefits for longer than initially envisaged.

That said, change has been rapid and strong. By early 2008, Germany’s outlook finally appeared rosier than it had for decades. While a global economic slowdown could pose a threat to Germany’s heavily export-based economy, fortunately the country has no property bubble to worry about and is expected to be able to enjoy growth at around two percent per annum over the years to come. However, challenges are being faced by several German banks including giant Deutsche Bank, who are caught up in the global sub-prime lending mess. Time will tell how that web of financial problems will unravel.

As an exporter, Germany still has much to be proud of. With its main exports of vehicles, machinery and chemical products, Germany often proudly refers to itself as the “Exportweltmeister” (world champion exporter), although the rest of the world may beg to differ — it was overtaken in by China in 2007 by some measures, and on a pro-capita basis comes only in at only No. 8. Nonetheless, German exports remain impressive, far above those of the US.

Despite its improving unemployment figures, lack of a property bubble and strength as an exporter, Germany still faces problems. The beneficiaries of the economic upswing have been the corporations and their managers, while the purchasing power of the average household actually fell over the three years leading up to 2008, once inflation is taken into account. Anger with rich managers is growing across the political spectrum, and stoked by a series of scandals, including the resignation of the head of Deutsche Post World Net after revelations of tax evasion.

School’s never out

Germany’s reputation for world-class education has taken a beating in recent times, especially within the country itself. Critics of the German education system say the nation’s universities are far from world-class, using a lacklustre presence on global ranking lists as evidence. The poor performance of German schools, even in science, in rankings such as the OECD and PISA league tables which receive a great deal of attention within Germany, tends to trigger considerable recrimination and self-flagellation in the German press.

Many young people in Germany who choose to not follow the academic path of entering university after secondary education find places on vocational training schemes. These combine an apprenticeship in a company with part-time college study, providing the qualifications and skills needed for Germany’s technical industries.

It is the higher education system, however, which raises eyebrows among critics. As opposed to offering a limited number of places in courses and programmes at universities, anyone with the right high school qualifications is entitled to study at the university of their choice, resulting in lecture halls that are overflowing with students who will rarely get to know any of their lecturers.

Until recently, post-secondary education in Germany was free and it was up to students to decide when to take their final exams. Because of that, it was far from unusual to meet people pushing 30 still living off their parents and considering taking their final exams the following year, or maybe the year after. Things are slowly changing in this regard, with some states introducing fees (although far below US or even English levels) and, more importantly, Bachelor’s and Master’s degrees being introduced as part of the European-Bologna process to replace the old, more complex and time-consuming system. The aim is to cut study time for students and to make the system more compatible with the rest of the world. This is a slow process, but should eventually see the end of the “eternal student” in Germany.

One problem which has become the subject of much discussion in recent times is the quality of German universities themselves, which are massively underfunded given the numbers of students they are expected to deal with. Plans are afoot to create a number of “elite” universities such as in France and Britain, which it is hoped will be able to compete on a world-class level. At present, the highest-ranking German university, The Ludwig Maximilian University of Munich (LMU), is placed 53rd in the ARWU (Academic Rankings of World Universities) rankings. That said, there are a number of scientific institutes which do well at attracting world-class talent, notably the many Max Planck Institutes around the country. The image of German academia as stuffed with elderly, outdated professors seems likely to be around, however, for a while yet — young academics are highly unlikely to get a decent post before their forties, and so the exodus of bright young things abroad or to other sectors seems set to continue.

German power

Germany’s energy sector is currently undergoing big changes, with the major domestic player, E.ON, agreeing in early 2008 to placate the European Commission by selling off its German distribution grid and large chunks of its production capacity. This looks likely to lead to E.ON increasing its foreign interests beyond Britain and Sweden, where it already has major holdings, whilst other European firms take over some of E.ON’s interests within Germany.

For all the government’s enthusiasm for investment in alternative fuels, Germany remains reliant primarily on oil and gas, with the major supplier being Russia’s Gazprom. The controversial planned Nord Stream pipeline under the Baltic will increase the reliance on Russia even further. With a phase-out of nuclear power set for 2020, it remains to be seen how the shortfall this creates will be made up, considering that nuclear energy currently contributes around a quarter of the country’s power.

There are currently fierce debates around the building of new brown coal power stations, a number of which are currently planned by the major power companies. The opoosition comes from local residents and Green politicians, who argue the cost benefits of coal-fired plants over gas will disappear once the cost of carbon emissions is taken into account. Brown coal currently makes up over a quarter of the country’s power supply and provides much-needed jobs in deprived mining regions, while cleaner gas largely needs to be purchased from Russia.

Strong foundations

Both historically and economically, engineering is given great importance in Germany. Engineering played a crucial role in rebuilding the economy after the disaster of World War II and is credited for being particularly responsible for Germany’s celebrated exporting prowess. The sector has traditionally been dominated by the so-called “Mittelstand”, the small and medium-sized companies which are often family owned and operated. Despite the attention paid to the Mittelstand by politicians of all stripes, their dominance is slowly being eroded and replaced by that of major multinationals. For example, Europe’s largest engineering conglomerate Siemens has achieved extremely solid growth in recent years, despite facing various scandals in 2007 that werereported heavily upon in the German and financial press, ranging from bribery and corruption to market-rigging.

Automobile manufacturing accounts for 40 percent of German exports and one in seven jobs in the country. The emphasis on big, heavy cars looks likely to cause problems for companies including BMW in years to come as regulation increasingly favours light and more efficient models, despite the German government’s best efforts to frustrate European attempts to introduce tougher environmental rules for new vehicles.

Inside Germany’s bathroom cabinet

The pharmaceutical sector is a large one, worth around 22.8 billion euros and employing approximately 95,000 people, of whom around 16,500 are in research and development (R&D). Exports account for 55 percent of sales, which is the largest proportion in Europe. Domestic sales, however, are low, as culturally, natural remedies tend to be an extremely popular alternative. The sector has also been badly hit by both national and European Union-issued healthcare reforms. To give a sense of proportion, the German pharmaceutical sector is slightly smaller than that of France, despite the fact that at 82 million people, Germany is larger than France to the tune of around 20 million people. In 2007 for example, France beat Germany to first place in the European pharmaceutical league tables, due to high domestic sales. After a lull in which the German sector suffered from poor levels of investment, spending on research and development has picked up significantly in the last five years. This has created a growing number of career opportunities. The major players in the country’s pharmaceutical sector are the global giant Bayer, based in Leverkusen, which merged with Berlin’s Schering in 2006, Boehringer Ingelheim in the Rhineland and Merck, a separate company to its American namesake, in Darmstadt.

German gold

The German banking sector remains highly fragmented, comprising more than 2,000 banks. Of these, private banks face strong competitive pressure from the large publicly owned and cooperative sectors. Meanwhile, at 75.48 percent, the cost-income ratio of the private banks is the worst in Europe. Although Germany itself had no recent property bubble, a number of banks have been hit by the fall-out from the subprime crisis in the US, which may eventually lead to some consolidation in the sector. However, the immediate outlook for the sector as a whole is rather bleak, as the effects of the credit crunch continue to make themselves felt and no consolidation is yet in sight.

The largest bank by some margin is Deutsche Bank, with Commerzbank, Dresdner Bank and DZ Bank AG following in that order. These top four are all based in Frankfurt, the nation’s financial centre. Employment in the sector has been falling for almost a decade, down to 681,300 in 2006, the last year for which data is available. As for the number of people employed by the big three in Frankfurt, however, the number of hires rose by 7,200 to 132,449.

More media than you think

Telecommunications in Germany remains dominated by the former state monopoly, Deutsche Telekom. Since privatisation in 1996, the company has struggled with problems of high costs, especially in relation to staff, and has lost many domestic phone and internet customers to competitors such as Arcor and Versatel. Half of Deutsche Telekom’s profit now comes from abroad and job cuts within Germany are set to continue. The mobile market is largely carved up between Deutsche Telekom’s T-Mobile, Vodafone, E-Plus and Telefónica’s O2.

The interests of German media companies’ extend well beyond the German-speaking world. The vast Bertelsmann corporation owns RTL, Europe’s biggest broadcaster with TV and radio stations across the continent, publishing giant Random House and Europe’s largest magazine publisher Gruner + Jahr, which employs over 100,000 people worldwide, of whom around a third are in Germany. Springer is the second-largest publisher of academic journals worldwide, while Axel Springer (no relation) not only dominates the domestic newspaper market but also has titles across the rest of Europe. Much hated by those on the left, the latter publishes Bild, Germany’s biggest-selling daily paper, which combines tabloid values and breasts with political agenda-setting and breaking news.

A good time to work in Germany

From a legal point of view, working in Germany is easy for those from the original (pre-2004) EU countries, as well as Switzerland and Norway, who don’t require any special permits. For citizens of the countries that joined the EU on May 1, 2004: Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia, special rules are in place until 2011. For Bulgaria and Romania special rules are in place until 2013, which means citizens will need to apply for a work permit, as will workers from non-EU countries. This should be a relatively straightforward process for those with special skills, particularly in IT, if a firm job offer has been received.

While speaking German would seem an obvious prerequisite for a job in Germany, a surprising number of large companies use English within the office as the main business language. Even if this is not the case, almost everyone you will come into contact with on a professional basis should speak fluent English and be eager to practice it as soon as they hear a trace of a foreign accent. One should bear in mind that Germany has no shortage of highly qualified graduates, often with very specific qualifications. After completing their studies, many will work for free or very low wages for months doing an internship known as a “Praktikum”, a prerequisite for access to many popular jobs.

Whilst there will always be competition for jobs and slowdowns in every sector, the outlook for graduates looking to work in Germany is extremely bright indeed. The combination of its powerhouses in a variety of industries, particularly engineering, export production and banking, means that career prospects for the ambitious graduate are wide-ranging. The sky is the limit for those with the skills and attitude to commit to a career in Germany. All the companies making the top 50 have a global reach and can send their employees far beyond European borders. They also offer great opportunities to stay in Germany and get world-class training, enabling graduates to climb up numerous different career ladders.