Following the international economic crisis, Germany is back with a bang, and the good news keeps rolling in: In 2010, the GDP grew by almost 4%, exports have just about reached the billion-Euro mark, and employment is at its highest since the German unification in 1990 (Wiedervereinigung). The upturn promises higher incomes, a growing domestic demand and increasing tax revenues. How did Germany succeed in overcoming the international financial and economic crisis this successfully, while other countries keep struggling to counterbalance its devastating effects?

Following the insolvency of Lehman Brothers in September 2008, the crisis hit Germany with full force. Within six months, German imports and exports and industrial production had fallen by more than 20%. In January 2009 alone, Germany's showcase branch, the automotive industry, produced 34% fewer vehicles than in the same month of the preceding year.

By mid-2011, Germany is well on its way to recovery, and the international press has proclaimed the German upturn a miracle. In truth, Germany's recovery from the crisis has less to do with a miracle, but more with the fact that the German Federal Government managed to slow down, and then turn around, the downward trend by pragmatic thinking and foresight. Thus the German Federal Government announced business support programs (Konjunkturprogramme) valued at billions of Euros, which benefited - and continue to benefit - the German economy. Buildings are being renovated owing to substantial public sector investments, and the so-called "scrapping premium" (Abwrackprämie - meaning that an amount of EUR 2,500 was paid to each person having his / her (at least nine year old) motor vehicle scrapped, and buying a brand new vehicle instead) greatly supported the motor vehicle industry. Meanwhile, the rescue package (Rettungsschirm) for the banks prevented further distortion from occurring in the financial sector.

The employment law measures introduced in 2010, including flexible working hours and short-time work, prevented mass redundancies during the crisis. In the economic upturn, the same measures have allowed businesses to respond quickly to the increasing demand from emerging markets like China, India and Brazil. The range of products offered for sale by German businesses is well-positioned to meet the needs of these emerging markets, enabling Germany to benefit from their economic dynamism.

During the crisis, Germany's influential mid-sized businesses (Mittelstand) constituted the backbone of the German economy. The Mittelstand accounts for more than 90% of businesses in Germany, and employs 65% of the German workforce. The majority of these businesses are family-owned businesses. Their distinguishing features are continuity and long-term thinking, as opposed to the making of short-term profits, accompanied by frequent strategy changes. Large German businesses, too, have emerged from the crisis with flying colours. BMW, for example, recorded higher profits in the third quarter of 2010 than it ever has before, and the operating results of Siemens hit an all-time high in 2010 with an above-average growth of its environmental portfolio. Meanwhile, the construction industry and craft sectors are having to ask customers to postpone orders for a year due to exceptional demand, and the healthcare and renewable energies branches are short of qualified employees.

All this having been said, while we certainly would not dare to maintain that the German economical upturn will continue at the current pace forever, we are of the view that there seldom has been a better time to invest in Germany. Should you wish to be part of the German economic upturn, and require any legal advice in this regard - no matter whether in German, English, or (almost) any other language - we look forward to hearing from you.

Gundo Haacke