ABSTRACT
This chapter explores to oudine the major determinants of German economic development and to sketch the challenges confronting the united German economy in the twenty-first century. Germany's political economy is confronted by a set of political, economic and demographic problems that will test its manoeuvrability. Demographic imbalance is evident from increasing longevity among the old and a birthrate considerably below the level for social reproduction. Growth underpins the corporate strategies of Germany's major enterprises. Their success in raising turnover or increasing the return on capital is critical in the eyes of the stock market and banks. The decoupling of production markets, financial markets in the wake of globalisation is best illustrated by the disparity between the value growths of financial assets compared to real assets GDP. It is difficult to explain Germany's overall economic policy failure or Bundesbank policy in particular without reference to the European context, in particular to the process of 'deepening' the integration of EU countries.
