Germany’s economy has always played a prominent role in its rich history. It has come along way to rebuild its shattered economy, losing two world wars and the carrying out of a horrific genocide. Today, Germany dominates Europe on many levels. Participating in two world wars caused havoc on Germany’s economy and for many years, their future seemed bleak. They rebuilt their economy with great success. While most of Europe entered recession in late 2008, Germany was going from strength to strength economically. These topics are very relevant to our personal lives, not a day goes by without the economic state or fiscal crises being mentioned in the various forms of media. These issues affect us directly. Germany as a whole has developed greatly in recent years, in it’s society, it’s economy and other important areas. In my speech I will address many points that discuss Germany’s evolvement into a European economic superpower. I will discuss most importantly the history of Germany in the European Union and how it’s connected to the role of the economy in German history, exploring how Germany has developed in areas such as foreign policy, Gross Domestic Product and Inflation figures, the great divide between East Germany and West Germany after World War II and then Reunification. I will explore and refer to journals, books and popular press sources in Germany throughout my speech.

After the First World War, Germany was left in a vulnerable state. Germany was economically devastated after a gruesome defeat in World War I. The economy was completely ruined. The Versailles Treaty didn’t help matters and forced Germany to give up 13% of its land, a very valuable resource. At first Germany attempted to recover from the war by increasing social spending. Germany began creating transport projects; new gas works projects and other social projects. These aided unemployment rates. Other countries introduced tariffs and this further deepened the depression of the German Economy. With Germany at it’s weakest and most vulnerable state, Hitler seized the opportunity to rise to power. He put forward many proposals and promises, among them were to rebuild the economy and totally wipe out unemployment. At a time when the German population were vulnerable adjusting to life after war, this was perfect timing for Hitler. Hitler used the Jewish population as scapegoats for all of Germany’s problems. He had two significant ideas that helped launch him to power. He had someone to blame and a plan for swift economic recovery, which included a four-year plan to completely eliminate unemployment. (Castillo, 2003)

According to Civitas.org.uk, (2012) Germany is the country with the largest population and was one of the six founding members of the European Community in 1957. Having experienced enormous political upheaval during the 20th century, the modern German political system places a strong emphasis upon stability and consensus. After World War II, Germany had divided up into two nations: the federal republic of West Germany and the communist German Democratic Republic (GDR).
These two states were reunified in 1989, after the fall of the Berlin Wall and the federal republic of Germany was created in 1990. A grand coalition was formed and it faced huge pressure to reform Germany’s social model due to high unemployment and an expensive welfare system. As a founding member of the EU the German government has frequently been at the forefront of the process of EU integration. Germany has signed up to all major integration policies including ‘The Schengen Convention’ and the Economic and Monetary union. As the target member state, Germany is very influential in the EU. It has 29 votes in the council of The European Union and elects 99 MEP’S. In 2010, Germany played a central role in creating a Eurozone stability plan; promising money to Eurozone countries whose excessive debt threatened the stability of the single currency.

After reviewing an article on news.bbc.co.uk, (2012) it’s clear that the economy plays a strong and prominent role in German history. Germany’s success since WWII is to a large extent built on its potent export industries, fiscal discipline and consensus driven industrial relations and welfare policies. It is particularly famed for its high quality and high tech goods. Germanys export dependent economy was initially hit hard by the global financial crisis of 2008/2009, which triggered the worst recession since 1949. By 2010, its exports had helped the country to rebound more robustly than most other EU members. Germany has always featured strongly in the running of the European Union. Their rich history in the European Union proves to be an interesting timeline. According to another article on news.bbc.co.uk (2012) the 1950’s were a period of rapid economic growth in West Germany and in 1955 West Germany joined NATO and East Germany joined the Warsaw Pact. Shortly after this in 1957, Germany joined the European Economic Community (EEC) while East Germany did not. There was no sign of reunification and The Berlin Wall was constructed in 1961, creating a sharp divide between East and West. Soon after the construction of the wall, the East German constitution declared that Unification would be impossible unless the West became Socialist. As the year’s pass by, when reunification seems bleak, the leader of East Germany, Erich Honecker pays a first official visit to the West. In 1989, the Berlin Wall falls to the ground. And Germany is finally reunified. Berlin is named the new capital city and Germany joins the Maastricht treaty on European Union.
Germany has had an eventful history as part of the European Union, many leaders, scandals, parties and treaties. The first female chancellor was Angela Merkel, a member of the CDU party. She plays a prominent role in German politics and European politics and affairs. She has made many high profile decisions in relation to Europe in the form of bailouts and other fiscal matters. Of course, as with any other government, there has been political and social unrest. Many have protested against government plans to cut unemployment benefit among other reforms and cuts. In 2005, the parliament ratified the EU constitution, which brings more certainty to Germany. Chancellor Schroeder deliberately loses a confidence vote in order to call early general elections. The outcome of the elections is very close and the talks of a coalition follow. In 2008, the first signs of a financial crisis in Germany are present. One of the country’s largest banks faces bankruptcy and the Germany agrees on a 68 billion refinancing plan to save it. In the same year, Germany is officially declared to be in a recession. The official recession was short-lived and in 2009, Germany was deemed to be out of recession after a quarter of positive growth. Angela Merkel secures another term in office. With the rest of Europe facing burdens of debt and financial woes, Germany’s parliament votes to approve a 22.4bn euro bailout fund for debt-ridden Greece, which the public did not react well to. In 2011, Germany’s economy is still booming, with exports to thank for it. In an article published on TheEconomist.com (2012) puts the statement forward that ‘No big developed country has come out of the global recession looking stronger than Germany has’.

I will give you a brief history on the divide and unification of Germany to clarify this section of my speech. The divide in Germany after World War II is a major period in history. When World War II ended, Nazi Germany was taken over by the allies, the US, France, England and Russia. Germany was divided into various zones with the idea that the allies could work together to get Germany back on track again. The US and Russia had problems agreeing and working together. In the 1940’s, the cold war erupts between the US and Russia. Germany is divided and East Germany is run by Russia using communist policies and strategies, while West Germany is developed into a capitalist state. Conditions in East Germany were harsh and strict. West German life was much more relaxed and easy-going. Many residents of East Germany tried to escape to West Germany and many were killed immediately.

Germany has worked hard and intensely to strengthen their economy since both the world wars and even sine reunification in 1989. This quest for normality was not easy. When we look at the development of German Society and economy through economic concepts; theories, frameworks and ideas we discover an interesting history. I came across an article titled ‘’The Elusive quest to normalcy: The German economy since Unification’’ by Stephen J. Silvia (2010) which examines the way East Germany struggled to recover from the aftermath of reunification. It explains the uneasiness Germans experience in relation to reunification.
‘’Twenty years after all the excitement, Germans seem to be genuinely of two conflicting minds about unification. One is characterized by awe over the accomplishments of 1989-1990, the other by disappointment and even bitterness over unfulfilled ambitions and promises’’. The East Germans seem to be unsure as how to react to the situation. The primary feature of life after unification is the social divide between East and West. The text goes on to explain that ‘unemployment levels have remained persistently higher in Eastern than in Western Germany and output levels have remained extremely uniform across the Eastern States’, this suggests that there still was a great divide after unification and it was evident that it would take time, maybe years to adjust to the unification. It also suggests that East Germany found it more difficult to adjust than West Germany as West Germany had been more developed and East Germany lagged behind. There are many economic reasons behind these theories, the following statement from the article sheds some light on the issue, ‘’Keynesian and Neoclassical economists have proposed differing explanations for the persistent high unemployment in the East. The latter have the more convincing argument, which blames high initial wages in East Germany since unification. Public policy in the years immediately following unification is in large part responsible for both outcomes’’.

Today, there are still arguments remaining that believe there are still differences present between East and West Germany. In an article published on ft.com (2009) by Chris Bryant, he discusses the differences that still remain today and his evidence to support it. Nowadays, in my opinion it is difficult to distinguish East from West Germany. The East has had it’s infrastructure improved and its buildings restored to make a concrete unification. Bryant (2009) suggests that Germany is still divided and still not the same as pre-divide, ‘’But at a political, consumer and even psychological level, Germany cannot yet claim to be one country. While the gap is narrowing, particularly among Germans born after the fall of the wall, spending and voting patterns, demographic data and the way Germans talk about their identity all emphasise a continuing gulf between east and west’’. His article provides many interesting facts and figures about the divide and unification, stating that Only 27 per cent of easterners think east and west Germans have become “one people” during the past two decades according to a recent Forsa poll. Günter Nooke, a civil rights activist during the final years of the German Democratic Republic and now the government’s commissioner for human rights, explains that differences between east and west are of a different quality to those that, say, separate a Bavarian from a Rhinelander. “The east was socialised for 40 years. We lived in another country in which this ideology was always present. There wasn’t anything to buy. It was grey not colourful, and creativity was always dangerous.” This reiterates the image portrayed of the East, grey, bleak and harsh. East Germans lived under a strict political regime throughout the divide during ‘a period of profound social and economic change in the west’’. Bryant (2009) states that he is not surprised that 20 years later divides still remain. After the falling of the Berlin Wall, Easterners of working age had three main options:
‘‘Retrain, join the ranks of the long-term unemployed or move to the west’’, any of these being a difficult and sudden decision. According to Civitas.org.uk (2009), Between 1991 and 2008 the net population loss from east to west totalled about 1.1m, with proportionately more women making the journey than men’’. The young population from the East in particular continue to move Westwards seeking higher wages, better career prospects and so on. While the impact of the divide was severe, it is slowly returning back to normality. Two nicknames surfaced around the time of the divide, Ossi and Wessi, referring to people from East and West Germany. A Gfk poll (2009) has also showed that 80 per cent of 14-19 year-olds now see themselves as German and no longer make use of the nicknames. There is still some evidence of the divide in the present day, in the way both former East Germans and west Germans vote. Social Democratic minister, Wolfgang Tiefensee, claims that much has been done to close the gap between east and west. According to Bryant (2009), even the simple differences still exist, like shopping habits.
‘’After the wall fell, western corporations scrambled to exploit novice eastern consumers in the east but they soon found that their advertising campaigns were ineffective’’. This verifies that the divide between East and West was strong and adjusting wasn’t the easiest. Alexander Mackat, whose advertising agency developed campaigns specifically targeting eastern preferences, says the east-west divide still exists but has narrowed. “After a decade of crisis when job losses, economic stagnation, climate change and terror convinced people that things were no longer getting rapidly better, there has been a change of mentality in the west. They are discovering traditional values.” His opinions clarify that the two sides are gradually coming closer together.

To further discuss the development of German society and economy, I will explore the area of foreign policy in Germany. The first time period I will discuss are the years leading up to World War II. Following the rise to power of the Nazi’s, Adolf Hitler’s government constructed a foreign policy aimed at the incorporation of native Germans living outside German borders into the Reich; ‘’German domination of Western Europe; and the acquisition of a vast new empire of living space in eastern Europe’’. Hitler realised quickly that he wanted Germany to dominate Europe. Germany adhered to a revisionist policy aimed at overcoming the restrictions imposed on Germany by the Treaty of Versailles and remilitarised the Rhineland in 1936. This violated the terms of the Treaty of Versailles, which forbade Germany from entering the area of the Rhineland. In 1938, Germany acquired new territories using the threat of war. In February, Hitler pressured Austrian chancellor Kurt Schuschnigg into signing the German-Austrian agreement (Berchtesgaden Diktat), which brought Nazis into the Austrian cabinet.
I then reviewed an interesting book, titled ‘‘German Foreign Policy since Unification’’ by Volker Rittberger,to explore foreign policy since unification. The text explains Germany’s foreign policy behaviour since Unification. When Germany became unified again, it’s position in Europe was altered in many respects; firstly the new Germany was bigger in all senses, territory, population and it’s economy. ‘’While the division of Germany after WWII had been deliberately designed to limit German power, which had been big enough to destabilise Europe twice, leading to two world wars, unification now undid this division and thus also removed the limitations to German power’’. Fears spread across Europe that this gain of power would prompt Germany to change its foreign policy. Naturally then, unification was inititally met with some resistance.

Germany’s Gross Domestic Product (GDP) is an important figure for the economy. This year, Germany’s GDP expanded 0.30 per cent in the second quarter compared to the previous quarter. History would show that from 1991 to 2012, Germany’s GDP figures averaged 0.30 per cent with the highest figure being 2.10 per cent and the lowest figure being -3.70 per cent. ‘The Gross Domestic Product (GDP) rate provides an aggregated measure of changes in value of the goods and services produced by an economy’. (Tradingeconomics.com, 2012) Germany relies heavily on its exports, and make up the bulk of national output. Exports have always been the key feature of the macroeconomic climate in Germany, providing strong economic growth.
Similarly, Germany’s inflation rate has fluctuated over the years. In the period from 1992 until 2012, Germany’s inflation rate averaged at 1.91 per cent, with the highest rate recorded of 6.40 per cent in 1992 and a low of -0.40 per cent in 2009, in the midst of a recession. Inflation rocketed in 1923,causing widespread hardship in a time of severe austerity. The Third Reich appeared to give people fresh hope for stability and maybe even prosperity. ‘It’s clear that Hitler’s overriding interest lay in the preparation for the conquest of Lebensraum and not primarily in the interest of the economy’ (Fulbrook, 2009). During their reign of terror, the Nazi’s were still focused on retaining popularity support, which meant limiting austerity. In 1935, Germany was near full employment but a few economic problems still lingered such as a shortage of foreign exchange reserves.

On a more positive outlook, this year Germany has surpassed the US in competitive rankings. Germany is an important world trader and to lie ahead of the world superpower, the US, is a significant achievement. When most of the world is suffering amidst the financial crisis, Germany can still retain their competitiveness, which shows how much they have developed throughout history. (Spiegel.de, 2012)

I hope my speech has highlighted the fruitful history of Germany through all aspects. Germany has been riven with crises, world wars, political instability, violence and huge economic uncertainties. Germany has suffered many tensions and transformations as well as significant growth.