Germany Country Brief
Overview
Australia and Germany enjoy an open and cooperative relationship underpinned by extensive political, economic and social links. Australia values Germany's continued political and economic engagement in the Asia-Pacific, including on counter terrorism initiatives, measures to encourage good governance, development aid and climate change.
Political Overview
System of Government
Germany is a Federal Republic. The Federal Government, based in Berlin, consists of the Federal Chancellor and the Cabinet of Federal Ministers. Federal elections are held every four years. In addition, there are 16 state governments and thousands of local government 'communes'. Each state has its own constitution and a state parliament. State elections are held every four or five years.
The federal legislative authority is the Bundestag whose members are elected through a combination of direct election and proportional representation. Following each federal election, the Bundestag elects a Chancellor by absolute majority. Angela Merkel was re-elected as Chancellor for a second term on 28 October 2009, following the federal election on 27 September. The Bundesrat represents the 16 state governments and has 69 seats. Based on population size, a state has between three and six votes. The Bundesrat debates all legislation, but only approves legislation affecting state responsibilities (e.g. tax revenue distribution).
The Federal President, who has ceremonial duties, is elected every five years by the Bundesversammlung (Federal Assembly), a body comprising all Bundestag members plus an equal number of state representatives. Presidents can serve up to two terms. The current President, Dr Horst Köhler, was re-elected for a second term on 23 May 2009.
Political parties
Germany has five major political parties: the Christian Democratic Union (CDU), including the Christian Social Union, the CDU’s sister party; the Social Democratic Party (SPD); the Free Democratic Party (FDP); the Green Party; and the Left Party.
The Left Party is a new addition to Germany’s political landscape. The Left Party was formed in 2006 from an amalgamation of the successor to the former East German Communist party (the Party of Democratic Socialism - PDS) and the Electoral Alternative for Labor and Social Justice (WASG) and is largely dominated by former left SPD members.
The Left Party is now represented in 10 of Germany's 16 state parliaments. According to a number of media commentators, the rise of the Left Party at the federal and state levels marks a structural shift in German politics from a four to a five party polity. The Left is the fourth largest party in the federal parliament behind the CDU, SPD and FDP but ahead of the Greens.
Recent Developments
The German federal election was held on 27 September 2009. The CDU secured the highest percentage of the votes (33.8%), followed by the SPD (22.9%), FDP (14.6%), the Left Party (12%), and the Greens (10.7%). The CDU and FDP have agreed to form a coalition government (with 332 seats out of a total of 622 in the Bundestag). The new German Cabinet was sworn in on 28 October 2009. The next federal election is expected in September 2013.
In nine state elections during 2008, the CDU lost ground. However, in eight, the CDU was able to form a coalition government either with the FDP (its traditional partner), or the SPD or the Greens (in Saarland, the CDU formed the first three-way coalition with the FDP and Greens). In Brandenburg, negotiations on a coalition government led by SPD Premier Matthias Platzeck, are ongoing. These state election results provide a slight majority in the Bundesrat for the new federal CDU/FDP coalition, assuring smoother passage of legislation. The next state elections are to be held in May 2010 (North Rhine-Westphalia) and in 2011 (another six states).
The CDU also lost ground in the elections for the European Parliament in June 2009.
Foreign Policy
During its 2007 EU Presidency and as Chair of the G8 (group of eight major industrial nations), Germany took a leading role on a number of key issues, including climate change, energy, the Middle East Peace Process, and international security. Germany also laid the groundwork for a reworked EU "reform" treaty signed on 19 October 2007 in Lisbon. Germany's parliament ratified the Lisbon treaty on 24 April 2008. Germany was the ninth EU member to ratify the treaty.
Germany is an important dialogue partner for Australia on a wide range of multilateral issues, including the global economic crisis, global security, arms control, disarmament, poverty alleviation, UN reform, human rights, whale conservation and climate change. We work together closely in forums including the Global Carbon Capture and Storage Institute, the International Renewable Energy Agency and the International Commission on Nuclear Non-Proliferation and Disarmament.
Germany is a strong supporter of multilateralism and is the third largest contributor to the UN budget. Germany continues to seek a permanent seat on the UN Security Council, but the issue has taken a lower priority under Chancellor Merkel than her predecessor, Gerhard Schroeder. Germany made a substantial contribution to the reconstruction of Iraq and provided humanitarian assistance for Iraqi refugees and internally displaced persons.
The NATO alliance is the predominant focus of German defence and security policy. Germany is the second largest troop contributor to the NATO-led mission in Afghanistan and provides the naval monitoring role in Lebanon as part of UNIFIL. Germany is also a contributing member of the UN mission in Darfur, Sudan.
Economic Overview
Analysis of the Economy
Germany was the world's fourth largest economy in 2008 with a GDP of US$3,673 billion. Germany was also the world's largest goods exporter - around US$1,465 billion with a trade surplus of US$259 billion. Exports made up over 45 per cent of GDP. Manufacturing is the mainstay of the German economy, with the export sector dominated by autos and machinery. Germany's exports of services are relatively underdeveloped and reform in the services sectors is relatively slow. New sectors, however, such as IT, biotechnology and renewable energy are growing markedly. Agriculture accounts for only one per cent of GDP.
Key Economic Indicators
Germany, the world’s largest merchandise exporter, was particularly exposed to the global economic crisis. Germany’s economy contracted suddenly, falling into recession in the first quarter of 2009 as global demand for German exports (a major proportion of GDP) weakened. GDP is forecast to contract by 5.1 per cent in 2009. There are signs that the worst is over. In August 2009, the German Federal Statistics Office announced that, contrary to expectations, the German economy grew by 0.3 per cent in the second quarter of 2009.
Forecasters attribute this to the German government’s stimulus package which boosted domestic consumption and investment. The Economist Intelligence Unit forecasts that inflation will fall from 2.6 per cent in 2008 to zero in 2009 as prices fall due to the contraction in the economy; unemployment will rise from 7.8 per cent to 8.5 per cent (reaching nearly four million). The budget deficit is forecast to rise to 4.7 per cent of GDP in 2009 due, in part, to the fiscal stimulus package including the cost of providing loan guarantees to financial institutions and higher spending costs associated with the economic downturn.
Bilateral Relationship
Cultural Relations
People to people links are significant. In 2008-09, 20,319 working holiday maker visas were issued to young Germans, a 16 per cent increase on the previous year (Department of Immigration and Citizenship) and around 400 working holiday maker visas to young Australians (German Embassy). In 2008, Germany was Australia's largest European market for students, with almost 6,000 German student enrolments in Australia (Australian Education International) and the second largest European market for overseas visitors in Australia of almost 161,000.
Germany promotes its culture in Australia primarily through the Goethe Institute and regular visits of musicians, artists and writers. The Australia Council has a representative in Berlin, assisting Australian artists in the German market. A Cultural Agreement between Germany and Australia, aimed at enhancing cultural and academic exchanges, was signed in November 1997.
A significant number of Australian artists are based in Germany, working in the fields of music, performing and visual arts, literature, as well as arts management. They include prominent figures such as Simone Young, General Manager and Musical Director of the Hamburg State Opera, and Barrie Kosky, who has been appointed Managing Director of Komische Oper in Berlin from 2012. Australian performers regularly tour Germany, including in recent years leading companies such as the Melbourne Symphony Orchestra and the Queensland Ballet.
The discovery in March 2008 of HMAS Sydney and the German ship HKS Kormoran, both of which sank off the coast of Western Australia in WWII, has brought Australia and Germany closer together.
High Level Visits
The Prime Minister, the Hon Kevin Rudd MP, visited Germany 7-8 July 2009 and held discussions with German Chancellor Merkel and President Koehler. The Minister for Transport, Infrastructure, Regional Development and Local Government, the Hon Anthony Albanese MP, visited Germany in May 2009 and June 2008. The Minister for Environment, Nature Conservation and Nuclear Safety, the Hon Peter Garrett MP, visited Germany in May 2008 and the Minister for Innovation, Industry, Science and Research, Senator the Hon Kim Carr, in March 2008. In February 2007, the then Foreign Minister, the Hon Alexander Downer MP participated in the 43rd Munich Security Policy Conference.
The most recent visit to Australia by a German Minister was Finance Minister Peer Steinbrück who visited Melbourne in November 2006 for the G20 Finance Ministers' Meeting. Two senior German federal parliamentarians visited Australia in the first half of 2009; and in 2008, three senior German federal parliamentary delegations and also two high level German business delegations.
Bilateral Agreements and Official Dialogue
In February 2007, Australia signed an MOU on development cooperation with Germany, which establishes a framework for ongoing cooperation in the Asia-Pacific region, an enhanced working holiday maker arrangement and a supplementary social security agreement on elimination of double payment of superannuation for temporary workers. Australia and Germany signed a bilateral social security agreement in December 2000, to give improved social security protection to people who have lived and/or worked in both Australia and Germany. The social security agreement also exempts Australian employers from the need to provide German social security support for Australian employees sent temporarily to work in Germany, provided the employee remains covered in Australia, by compulsory superannuation arrangements. Further information is available on the Australian Taxation Office website.
Australia and Germany have a number of other bilateral agreements, including double taxation, extradition, cultural cooperation, reciprocal banking arrangements, and scientific and technological cooperation. Texts of bilateral agreements are available at the AUSTLII website. Germany is currently a priority country for science and technology engagement under Australia's International Science Linkages Program in areas of nanotechnology, water resources and clean energy technologies. The Group of Eight Universities (Go8) signed a research cooperation arrangement with the German Academic Service (DAAD) in May 2007.
Senior officials bilateral talks take place regularly, including on climate change issues, counter-terrorism and development aid. The most recent senior officials talks took place in Canberra in March 2009.
Bilateral Economic and Trade Relationship
Bilateral Trade
Bilateral trade links between Australia and Germany are substantial, but heavily in Germany's favour. In 2008-09, total two-way merchandise trade was valued at over A$13.2 billion, of which A$11.107 billion were imports from Germany. Germany is ranked Australia’s fifth largest source of merchandise imports (mainly cars) and is the largest source of imports from Europe. However, Germany is only ranked as Australia's 17th largest merchandise export market. Overall, Germany was Australia's tenth largest merchandise trading partner in 2008-09.
Australia's merchandise exports to Germany in 2008-09 rose over the year to A$2.185 billion. Coal exports to Germany in 2008-09 amounted toA$523 million. The main manufactured export was electrical circuits. Alcoholic beverages exports peaked at A$72 million in 2004 but have since almost halved.
Two-way trade in services between Australia and Germany remained at A$2.2 billion in 2008-09.
Bilateral Investment
In 2007, reflecting the growing trade relationship and increased business presence of Australian and German companies in each other's countries, foreign direct investment (FDI) by Australia and Germany peaked at A$11.1 billion and A$17.6 billion respectively. In 2008-09 following the global financial crisis, German FDI in Australia fell to A$13.74 billion, and Australian FDI in Germany fell to A$7.94 billion.
The 330 German subsidiary companies and 470 branch offices of German companies in Australia are active across a broad range of sectors: the automotive and automotive components industry (DaimlerChrysler, BMW, Bosch, Hella and VDO); telecommunications (Siemens); refining plants and environmental products (Lurgi, KruppUhde); building and construction (Hochtief and Bilfinger Berger through their affiliated companies Leighton Holdings and Baulderstone Hornibrook, respectively); and chemicals (Boehringer, Schering). German banks also have a significant presence in Australia with Dresdner having centralised its global commodities business in Sydney and Deutsche Bank, which celebrated its 35th year in Australia in 2009, being the largest European Bank operating in the Australian market.
Aerospace Australia, wholly owned by EADS, provided helicopters to the Australian Defence Forces. Blohm and Voss was the German partner in the multi-billion-dollar ANZAC frigate project, the largest single cooperative project between Australia and Germany. VUAG bought the Kurri Kurri aluminium smelter in the Hunter Valley. It is estimated that these companies together generate thousands of jobs in Australia.
About a third of the German subsidiary companies also manufacture or assemble in Australia, making an important contribution to Australia's exports and R&D capability. For example, VDO Australia develops and produces instrumentation, fuel-supply units, electronic modules, windshield-washer systems and sensors to markets in Germany, France, Malaysia and the United Kingdom, and Australia is also the site of one of the company's three worldwide research and development centres. Bosch has established a Centre of Competence for R&D into vehicle security systems, which services the entire company and is the only such centre located outside Germany. The German supermarket chain Aldi continues to expand its operations in Australia since entering the market a few years ago. Schrey & Veit, a German manufacturer (vibration dampers for railway rails, wheels and steel bridges) has recently established in Australia.
There is growing recognition by German business of the benefits of Australia as a headquarters for regional operations. Lufthansa, for example, has located its Asia-Pacific reservation call centre in Melbourne to take advantage of the wide range of available language skills and telecommunications infrastructure, and Volkswagen has established its Volkswagen Group Australia which imports and distributes VW cars, in the region. (For Australian companies operating in Germany, refer to Trade Successes below.)
Separately, in June 2009, the German investment firm, Direct Invest, announced it would increase its investment in its Surat Basin coal project. Direct Invest is also investing in the development of clean coal projects, including coal-to-liquid (CTL), gas-to-liquid (GTL), as well as carbon capture and storage.
Australian Trade and Investment Strategies
Germany's political and economic weight makes it influential in the EU policy formulation process. The Australian Government actively encourages Germany to show leadership within the EU in pushing for increased international trade liberalisation, especially in agriculture.
The Australian Trade Commission (Austrade) is the Federal Government agency that helps Australian companies win overseas business for their products and services by reducing the time, cost and risk involved in selecting, entering and developing international markets. Austrade's Opportunities Online website is a valuable resource for information on export opportunities to many countries, including Germany. Austrade has an office in Frankfurt.
Australia, through Austrade, encourages German investment in Australia. In particular, the Australian Government is targeting stronger investment links with Germany's small to medium sized enterprises (the 'Mittelstand'). These companies account for around half of German output and employ two-thirds of the German workforce. Australia and Germany have a number of bilateral agreements to promote commercial activity and labour mobility covering double taxation, reciprocal banking arrangements and social security.
Export Opportunities
Germany offers Australian companies many commercial opportunities as a gateway into Central and Eastern Europe. Many German companies have strong commercial links with, and expertise in, Central and Eastern Europe. Australian companies can make useful contacts at trade fairs through which more than 90 per cent of new products and technologies are introduced into the German market.
Automotive
The German automotive and automotive parts industries are a major source of international investment. Opportunities in Germany include original equipment manufactures (OEM) components, light materials, aftermarket components and accessories (including replacement parts), alternative fuels technology and equipment, tooling and production equipment and engineering services.
Information and Communication Technology
Opportunities exist for Australian companies in IT security, software and niche hardware, telecommunications applications and e-commerce, e-government and e-banking services, particularly with the deregulation of the telecommunications sector and the launch of the German Government's program Bundonline 2005, which put 376 government services online.
Biotechnology
Germany has a large pharmaceuticals industry. The market has well established international networks and offers easy access through government-supported biotech clusters with access to public as well as private funding. Opportunities in Germany include research and development contracts, research and strategic collaborations, licensing agreements and export of base products (marine and plant organisms) for pharmaceutical manufacturing.
Education and Training
Germany is Australia’s largest source of foreign students from Europe - almost 6,000 student enrolments in 2008. Increased opportunities in the postgraduate education sector can be expected as Germany undertakes reforms in its tertiary education sector. Postgraduate studies provide institutions with the greatest opportunities to enter the German market, particularly in the areas of Information Technology, International Law and International Business and Technology. The cooperative arrangement between the Group of 8 Universities (Go8) and German agency DAAD will help promote university research exchanges. Additionally, Working Holiday Maker visa holders aged 18 - 30 are able to undertake English Language Intensive Courses for Overseas Students (ELICOS) and vocational and training opportunities that offer short placements of up to three months duration.
Fresh Produce
Seasonal opportunities (September to May) exist for Australian exporters (with tightly controlled supply chain management and a strong import/distribution partner in Germany) to supply the German market with fruit, including apples, citrus fruits (navels and easy peelers), pears and cherries. Limited opportunities also exist for high-quality seafood exports to Germany, particularly in niche markets.
Trade and Investment Successes
An increasing number of Australian companies are operating and investing in Germany. Recent activity includes Australian company Sonic Healthcare’s acquisition of the German laboratory company Bioscientia. The Australian investment bank Macquarie is present in the German market, including for example via a majority holding in billing services company Techem, and with PBL owns one of Germany's largest real estate websites, Immobilien Sout.
One of the largest Australian companies manufacturing in Germany is CSL Behring. Based in Marburg, CSL employs around 2,000 people in the development of blood plasma products. CSL Behring opened a new facility at Marburg in July 2009. Eastland Medical Systems has a holding in HC Pharma Berlin, a pharmaceutical company. Quicksilver Technologies, a composite materials manufacturer, has secured a manufacturing development contract with Airbus Germany. Several precision engineering and production firms input into the German manufacturing supply line, including Bishop Engineering and ANCA Machinery (precision grinding). Plantic, which produces biodegradable packaging, is establishing a manufacturing operation in the German state of Thuringa.
In recent years, a range of other Australian companies have been active in a wide range of German sectors, including Cochlear, Transfield (solar cell technology), Oztrak (mobile data communications systems), ResMED (anti-snoring), John Fairfax newspaper and magazines, Burns Philp (yeast and bakery), Greencorp Magnetics, (recording tapes), Brambles (waste management), Amcor (packaging), MIM, Moldflow (software solutions), SDI (dental products), Nufarm (agricultural products) Goodman Group (real estate) and Greater Union (cinema).
Tradeinfo Contacts
If you would like more information on the trade and economic conditions in Germany, please e-mail the Department of Foreign Affairs and Trade: Tradeinfo@dfat.gov.au
Updated: 11 November 2009