Germany

Germany is a key trade partner for the Basque Country and is, along with France, one of the main destinations for Basque exports. Since the mid-20th century, when Basque industry began to expand beyond its frontiers, Germany emerged as a priority market for fundamental sectors such as steelmaking, industrial machinery and, in more recent decades, the automotive industry and renewable energy.

The relationship has been driven by the complementary aspects of both economies. On the one hand, Basque companies with their robust industrial base and innovative power have found in Germany not only a sound market for their products, but also a key partner for the transfer of technology and the joint development of advanced solutions. On the other hand, the presence of large German multinationals has bolstered the trade relations and business interdependence that continues to be vital for both territories.

The main trade partner of Basque companies

Germany holds a leading position on the global stage as one of the main political and economic powers of the world. Germany, with Europe’s largest economy and the fourth in the world, is a key driver of economic growth in the European Union and an influential player in international financial and political decisions.

Apart from being an economic powerhouse, Germany plays a crucial role in global governance by means of its involvement in multilateral organisations such as the European Union, the G7, the G20 and the UN. It is known for its focus on international cooperation, promoting free trade, and fighting climate change.

The German economy is noted for having a strong industrial base and a focus on technological innovation; it is a leader in sectors such as the automotive industry, engineering, chemical industry, energy and advanced technology. Germany also stands out for its robust export sector and is one of the main global exports of goods, particularly machinery and high-quality manufactured products.

The German economy has undergone a long period of weakness since the pandemic. The real GDP in the second quarter of 2023 remained practically unchanged on the two previous years, and growth during the post-pandemic years has been the lowest among G7 economies. Its GDP is expected to grow by the low figure of 0.2%, while average annual growth of 1.2% is expected for 2025-2028. The current geopolitical context, the war in Ukraine, the slowing down of the Chinese economy, the downturn in industrial orders, along with the internal economic dynamics of low consumption, fiscal adjustment, low social spending, labour shortage, are constraining the growth potential of its economy.

Germany’s external sector plays a crucial role in its economy and is one of the country main engines for growth. Germany is the world’s third largest exporter, with key sectors such as the automotive industry, machinery, chemical products and pharmaceutical products.

Its current account has consistently posted significant surpluses in recent decades, driven by its robust trade balance. Between 2015 and 2019, Germany had the largest current account surpluses in the world in nominal terms, exceeding China in some years. The current account surplus is expected to stabilise at around 5-6% of the GDP during the envisaged period. That will depend on the increase in the demand for German products, particularly by China and on the global structural changes in key export sectors such as the automotive industry. The imports of cheap Russian gas have slightly curbed the imports to the country and the competitiveness of the companies, but they will gradually recover. Germany also has high revenues from investments abroad.

Despite its current low growth, the strong German economy makes the country attractive for businesses. It offers a solid infrastructure, a stable business environment and a highly skilled workforce. Furthermore, it has a powerful network of favourable political and trade agreements for foreign investment. Its central location in Europe facilitates access to other important markets of the continent.

There may be opportunities in the digital connectivity and telecommunications business, as Germany is significantly lagging behind in this area. Furthermore, the administration and private and public companies need to be updated if they want to be more competitive and efficient. The renewable energy sector (solar, wind, biomass) show opportunities, as Germany no longer has low-cost Russian gas nor nuclear power plants producing energy. Given the ageing population, great demand is expected in the health area, particularly in the services sector.

The economic stability and its position as one of the leading benchmark sovereign issuers in the Eurozone make Germany a low-risk countries for investors, endorsed by the soundness of its institutions and its history of responsible public finances.

That is despite recent challenges, such as the higher structural costs, the high costs of consumables, falling global demand, stricter financial conditions, high tax rates and a labour shortage. The market is open to foreign investment, but is beginning to control key markets for the economy, such as the high-tech sector. Its modern financial system and its robust legal system offer a safe country for investors.

The government intervenes strategically in key sectors such as energy, by fostering policies such as the ‘Energiewende’ (energy transition), which seeks to reduce dependency on fossil fuels by means of encouraging the use of renewable energy. It also plays a crucial role in innovation and research, by means of private-public partnerships, particularly in sectors such as advanced technology and the automotive industry.

Germany is known for its high degree of trade openness, which is reflected in its participation in international trade and in its many trade agreements through the European Union (EU). The country has a degree of trade openness (i.e. the sum of imports and exports as a percentage of the GDP) of over 85%, which makes it the most open economy among the G7 countries.

Germany is a key country in the global supply chain, mainly in the industrial manufacturing sector.

Trade red tape and customs delays are an obstacle for foreign investors, particularly for those from outside the EU. Even though the safety standards are not discriminatory, they are usually applied strictly, which can cause delays. The German Länder (Federated States) have a say in European affairs through the Bundesrat (Upper Chamber of the Parliament, to which the federal government must report at any early stage in order for them to be approved beforehand by the Länder. The federal government recently called for less national and EU red tape.

Germany is a country with a clear and transparent legal structure, with clear framework and procedures. However, it should be mentioned that the complexity of some of those procedures and the possibility of the government interfering in some sectors add risk to its legal system. Germany is a country with a highly effective legal system, meaning it has robust legislation regarding intellectual property rights, corruption or monopolies.

Contact office

Alicia Santamaría

Director of Basque Trade & Investment Germany

BASQUE TRADE & INVESTMENT DEUTSCHLAND

Leopoldstraße 29 2.OG,
80802 München

+49 894 522 1370

asantamarias@basquetrade.eus

* Office hours:

7.30 a.m. to 4.00 p.m. Monday to Thursday
8.00 a.m. to 1.00 p.m. on Fridays

Latest news

See more
InterMundos ? make it global: the difference between ?good content? and ?great content?

InterMundos ? make it global: the difference between ?good content? and ?great content?

Jul 12, 2019
Read More

How can we help you?

At Basque Trade & Investment, we help you with your internationalisation process, whether you need personalised services and if you are looking for information to expand your company abroad.
CONTACT US