Germany

On 3 October 1990 the German Democratic Republic (GDR) acceded to the Federal Republic of Germany (FRG), creating a federation of Länder or states with an area of 357 000 km² and a population of 80.6 million (1992 estimate). The economy of the FRG ranks third in the world, with exports typically accounting for a high level of 31% of GDR Manufacturing dominates the economy, based on traditional engineering skills, and the structural shift to the private service sector has been smaller than for other OECD countries (OECD, 1994). Unification accompanied a period of economic growth and optimism, followed by realization of the massive costs of rejuvenating the Neue Bundesländer’s (ex GDR) infrastructure and economy. Inflationary pressure followed, interest rates rose in 1992, and recession resulted as the Deutsche Mark’s strength reduced export competitiveness. The economy is now growing again, although future growth for the FRG is forecast to be lower than in previous recoveries. This will probably be partly compensated for by high growth rates in the Neue Bundesländer (OECD, 1994).