Germany

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Full Report: Germany

Overview

1910-1913: Unified under Otto von Bismarck in 1871, Germany quickly becomes an industrial and colonial power. But under Kaiser Wilhelm, Germany's foreign policy is far less diplomatic, as rising military power and aggression causes tension throughout the region.

1914-1918: The assassination of Archduke Ferdinand triggers World War I. Germany finances the war with bonds, hoping to win quickly and gain territory in the process. But the war bogs down in the trenches, popular support wanes, and by 1918 the politically powerful army allows a more democratic government to take power and agree to a surrender.

1919-1932: The Weimar Republic embraces democratic principles, but successive governments must deal with an economy crippled by war debt, the exacting demands of the Treaty of Versailles, and the decision to print money recklessly to meet these obligations -- problems compounded by the global depression and opponents' efforts to undermine the treaty. Adolf Hitler's National Socialist Party slowly gains popularity.

1933-1938: The Nazis assume power in 1933 and quickly install a fascist one-party state. Government spending on military rearmament and economic self-reliance also brings down unemployment. Nazi courts and internal security bodies act with increasingly arbitrary power, targeting minorities and dissidents. German territorial designs complicate European politics and will trigger World War II.

1939-1944: To sustain the war, the Nazi government further mobilizes the "warfare state." Forced labor and raw materials from captured territories help make up for a shrinking and increasingly unskilled workforce, but the economy can't keep up with the demands of the war. Hitler's "Final Solution" exterminates millions of Jews and other minorities before the turning tide of war brings devastation to Germany.

1945-1948: The victorious Allies divide a destroyed Germany and its capital, Berlin, into four occupation zones. Returning soldiers and other expatriate Germans find few jobs in the devastated cities, and cigarettes and liquor emerge as key forms of currency. Price controls meant to curb inflation worsen shortages instead, until a new currency and the end of controls allows the free market to return.

1949-1960: The Allied sectors form the Federal Republic of Germany (FRG, or West Germany) and the Soviet Zone becomes East Germany. Under Chancellor Konrad Adenauer, Ordoliberal economists in the West create a "social market economy," mixing free markets and generous social programs. With the new Deutsche Mark (DM) and growing world trade, the West German "miracle" begins, helping to drive the European economy.

1961-1966: After millions of East Germans flee to the West, the Berlin Wall goes up, a symbol of the Cold War and a new obstacle to German reunification. Konrad Adenauer is succeeded by his ally, the Ordoliberal economist Ludwig Erhard. But the economic miracle begins to slow, and Erhard resigns in the economic downturn of 1966.

1967-1973: A new government introduces more economic planning, targets, and closer cooperation with labor. The policy works enough to help Social Democrat Willy Brandt take power before the economy falters again. Brandt looks eastward with his Ostpolitik policy, building ties to East Germany and Eastern Europe. In the détente in Cold War tensions, the two Germanys recognize each other and join the UN.

1974-1981: Brandt steps down in a scandal over East German espionage. His Social Democratic successor, Helmut Schmidt, moves the coalition to the center, although social programs continue to grow. The oil shocks worsen unemployment and inflation, and critics argue that the German model cannot adapt to the changing world economy.

1982-1988: Christian Democrat Helmut Kohl takes office. He tries to reduce the size of government through a policy of "reversal" (die Wende). The basic economic approach is unchanged, but a slow privatization trend begins. The Green Party grows in influence, forcing all parties to turn their attention to environmental issues. Economic ties with East Germany slowly strengthen.

1989-1990: The beginning of the end of the Cold War comes abruptly on November 9, 1989, as East Germans pour over the Berlin Wall to drink beer and champagne with West Berliners. Reunification follows just as suddenly a year later. The move is so popular that Kohl returns to power easily, but problems soon emerge as a free market wrestling with high unemployment tries to absorb a rusted-out command economy.

1991-1997: The Maastricht Treaty on European integration begins a new era. A strong proponent of European unity, Germany must now carry out economic reforms required for the single market and common currency even as it wrestles with absorbing the East. European integration pushes the privatization agenda, a politically difficult policy because of people's fear of losing jobs in a time of high unemployment.

1998-2001: An SPD-Green center-left coalition brings provincial premier Gerhard Schröder to power with pledges of economic and social reform and deficit-cutting. But unemployment remains high, and growth is sluggish. On January 1, 2002, the euro, the common currency, replaces the Deutsche Mark (DM), and Germany and Europe move into uncharted waters.

2002-2003: The German economy is stagnant, no longer the motor of Europe. Criticisms of Chancellor Schroeder's inability to spark growth mount, but he survives a strong challenge from the conservative opposition to narrowly win reelection in 2002. The German government and public opinion adopt a marked position against a U.S. war on Iraq. The domestic scene is dominated by unemployment and malaise.

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Political

1910-1913: Under Kaiser Wilhelm, foreign relations become more aggressive and far less diplomatic. Bismarck's careful alliances collapse, and Germany's worried rivals unite in response to military buildup. Domestic politics are marked by nationalistic rhetoric. The imperial Reichstag, or parliament, lacks authority to oppose the Kaiser and the military.

1914-1918: Archduke Ferdinand's assassination sparks a war that is soon mired in trench warfare. Popular support falls, and the chancellor resigns. Field Marshall Hindenburg becomes a near-dictator, opposing negotiated peace. Reforms in 1918 create a constitutional monarchy, and a progressive coalition under Friedrich Ebert assumes power and surrenders. The Kaiser steps down, and a republic is declared.

1919-1922: The democratic Weimar constitution calls for an elected president (Friedrich Ebert is the first) who picks a chancellor and Cabinet that reflects parliament. The Reichstag is in turn elected by universal suffrage and proportional representation, allowing small parties to gain seats. The system is undermined by the far left and right, and economic problems lead to a series of unstable governments.

1923-1928: Hitler's failed putsch is treated lightly. He writes "Mein Kampf" during his year in prison. Strikes, violence, and fears of revolt force a brief "great coalition" of left, center, and right-wing parties, and some stability returns. Germany joins the League of Nations in 1926. Nazi party membership grows through the '20s, though electoral successes are elusive. Hindenburg becomes president.

1929-1932: With Hindenburg's approval, Chancellor Heinrich Bruning rules by decree without parliamentary input, one step towards authoritarianism. The Nazis gain supporters from the unemployed, nationalists, and others affected by the Depression. Through an alliance with the conservative DNVP, the Nazis gain respectability, supporters, and, over the next three elections, many more seats in the Reichstag.

1933-1944: The Third Reich begins as Hitler is appointed chancellor, supported by conservatives hoping to harness his popularity. After a violent election, the Reichstag gives Hitler absolute power to suppress dissent, and a one-party state is born. Upon Hindenburg's death in 1934, Hitler becomes Führer ("leader"), head of state, and commander in chief. He retains power until his suicide at war's end in 1944.

1945-1948: Following the German surrender, American, Russian, French, and British armies occupy four zones. Parties form under tight control and denazification, holding elections at the local and state (Länder) levels. Concentration camp survivor Kurt Schumacher leads the SPD with a platform of state planning and public ownership. Angered by unification plans, the Soviets blockade Berlin.

1949-1954: The Allied zones unite as the Federal Republic of Germany (FRG), a federal system of 16 states and a bicameral parliament. National elections pit the planned economy of the Social Democrats (SPD) against the Ordoliberal Christian Democrats (CDU). The CDU wins, and 73-year-old Konrad Adenauer becomes chancellor, serving 14 years with Ludwig Erhard as economic minister.

1955-1960: Adenauer guides the country as it joins the European Coal and Steel Community (predecessor to the EU), the Council of Europe, and NATO. In 1955 the FRG's full sovereignty returns, but foreign and domestic fears limit the revival of the military. To better compete, the SPD drops its socialist platform and supports the social market economy: free markets with social responsibility.

1961-1962: The Berlin Wall goes up. Adenauer's majority falters, requiring a fractious coalition with the Free Democratic Party (FDP) and ending in his resignation in 1963. After 1962 many of the smaller parties vanish, leaving just four parties represented in the Bundestag until the 1980s: the conservative CDU and CSU, the left-leaning SPD, and the free-market centrist FDP, which often decides the majority.

1963-1966: Backed by the CDU/CSU-FDP coalition, Erhard becomes chancellor. He is less harsh towards countries that recognize East Germany than Adenauer was, but also allies even more closely with the United States. The FDP drops out of the coalition in 1965, and the CDU/CSU surprisingly invites the SPD to form a coalition in December 1966. With the economy in a brief downturn, Erhard resigns.

1967-1968: High unemployment, deficits, and fears of rising support for right-wing groups such as the National Democratic Party (NPD) leads to a Grand Coalition of the major parties. With Kurt Georg Kiesinger (CDU) as chancellor, the coalition seeks better cooperation with the trade unions and economic stability.

1969-1973: The FDP joins with the SPD, and the CDU is at last in the opposition. Chancellor Willy Brandt moves the SPD further to the free market. His Ostpolitik (policy toward the East) builds ties with the Eastern Bloc and recognizes East Germany, which some fear will prevent reunification. An attempt to oust Brandt with a no-confidence vote fails, but he resigns in 1974 upon learning an aide is a spy.

1974-1981: The coalition remains in place, and Helmut Schmidt, from the right wing of the Social Democrats, succeeds Brandt as chancellor. Faced with unemployment, student protests, and the oil shocks, Schmidt tries to govern from the center, alienating the unions in the process. He takes an extremely active role in economic policy.

1982-1988: After convincing the FDP to leave the coalition over economic policy differences, the Christian Democrats use the rare "constructive no-confidence vote" to oust the SPD and lead a coalition to power under Helmut Kohl. Kohl, an ambitious if uncharismatic admirer of Adenauer, is influenced by Thatcher-Reagan economic policies. The Greens become a small but increasingly influential political force.

1989-1993: Shortly after Kohl predicts it will not happen in his lifetime, the Berlin Wall falls. Kohl is reelected in the first free Germany-wide elections since 1932 on the strength of reunification, even though it has raised economic and social issues. Reunification brings with it new parties from the East, including former Communists and the Alliance 90 Party of former dissidents.

1994-1997: Despite an economic slump, the picture brightens enough for Kohl to stay in power in a CDU/FDP coalition. Alliance 90 and the Greens join together as the third biggest party in the Bundestag. Two xenophobic far-right parties also emerge, but do poorly in elections. The former East German ruling party gets less than half of its previous 11 percent score, but does well locally in the East.

1998-2001: Parliamentary elections bring Gerhard Schröder of the SPD to power in a coalition with the Green Party. The center-left coalition pledges growth and control of the rising government debt. In 1999 the capital moves from Bonn back to a revitalized Berlin. Schroeder's popularity declines as he confronts the difficulty of re-igniting the stagnant economy. Elections are scheduled for 2002.

2002-2003: The Schroeder government teeters in the run-up to September 2002 elections, and the conservative opposition led by Edmund Stoiber of Bavaria leads in the polls. But Schroeder's strong stance against a U.S. war on Iraq earns him public support, and thanks to a strong showing by his Green coalition partners, he is narrowly returned to office. He faces continued economic stagnation and malaise.

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Economic

1910-1913: Since unification in 1871, Germany experiences fast economic growth. Early successes in manufacturing, engineering, chemicals, and the auto industry --some with state support -- play a key role in growth after the interruption of world wars and depression. Hundreds of cartels strongly influence the economy until the postwar period.

1914-1918: War breaks out, and expectations for a quick victory soon vanish. More and more resources are needed to wage the unending trench warfare, and much of the effort is financed through bonds in the hopes of repaying them later through the spoils of victory.

1919-1928: Under the Treaty of Versailles, Germany must give up territory (and population) and pay reparations. War debt, reparations, and reckless printing of money cause crippling hyperinflation in the postwar years, while unemployment remains high through the '20s. The onset of the Depression ends a slight recovery. Government spending increases to 25 percent of GDP between the wars, up from 15 percent.

1929-1932: Depression in the United States prompts creditors to call in their loans to Germany. Unemployment rises to nearly 30 percent in 1932. Budget cuts designed to convince the Allies Germany was suffering too much to pay reparations do lead to a moratorium, but also cause misery and discontent, which in turn fuels the Nazi rise to power.

1933-1938: With the Nazis in power, subsidies boost industries tied to arms and self-reliance. Unemployment is almost zero, but wages are low, and foreign reserves shrink to fund expansion. Unlike Japan, Germany does not limit consumer goods, and rearmament is not yet fully planned. In 1936 Hitler urges Germany to be ready for war by 1940 through a Four-Year Plan that sets production quotas.

1939-1944: The war's opening blitzkrieg does not disrupt the civilian economy significantly. But by 1942, the war effort includes ever more centralized planning and control, and a warfare state that subordinates private property to Nazi purposes evolves. After 1944, faced with fewer workers, Allied bombing, and lost territory, planners struggle to maintain production, often relying on foreign and slave labor.

1945-1947: The economy is ruined by war, and many remaining assets are carried off by occupiers. Köln mayor Konrad Adenauer sleeps in his suit and coat to stay warm. The Allies control wages and prices, and in their zone the Soviets begin to establish a planned economy. Behind the scenes, a black market flourishes. Initially, parties from across the spectrum support a mixed economy.

1948: After firing his predecessor for calling U.S. food aid "chicken feed," the Allies appoint Ludwig Erhard as economic director. An Ordoliberal, he believes the state's role should be to promote competition while maintaining social welfare. Facing shortages and a black market, Erhard ends price controls after the Allies replace the Reichsmark currency with the Deutsche Mark, and the recovery begins.

1949-1965: Elections endorse the Ordoliberal "social market economy." Business, labor, and government cooperate on tripartite supervisory boards. The resulting Wirtschaftswunder ("economic miracle") raises GDP by two-thirds and reduces unemployment to 1 percent. Facets of a mixed economy remain, such as partially state-owned firms and several subsidies and controls. Public spending reaches 35 percent of GDP.

1966-1973: The miracle gives way to slower growth and new problems such as inflation. Keynesian economics minister Karl Schiller believes the state should play a bigger role, and the Law for Promoting Stability and Growth coordinates planning at all levels and sets targets for currency, growth, employment, and trade. Early success helps the SPD gain power, but Schiller resigns in 1972 as the economy slumps.

1974-1981: Oil shocks cause new problems as unemployment and budget deficits increase. Unemployment rises to almost 4 percent after many years at 1 percent. Critics charge that the economy is unable to adapt to global changes due to collective bargaining and rigid wage structures. Manufacturing stagnates, and subsidies for favored industries such as steel, shipbuilding, and agriculture increase.

1982-1988: In the Thatcher-Reagan era, Helmut Kohl's "reversal" policy scales back the state, whose spending has reached half of GDP. The privatization trend begins. Goals include cutting the deficit and regulation and making labor more flexible. Subsidies grow despite pledges, but public spending as a percent of GDP temporarily falls. Unemployment rises to 9 percent, but growth returns by the decade's end.

1989-1990: The fall of the Berlin Wall leads to the absorption of a command economy by a free-market one, followed by collapse of a rusted-out East German economy unable to compete or pay competitive wages. Firms are privatized or closed, and the West transfers $100 billion annually for social benefits and subsidies to firms, leading to high interest rates that restrict growth and jobs in Germany and Europe.

1991-1997: The Maastricht Treaty on European unification has a tremendous impact on Germany. The treaty places curbs on deficits and bans monopolies, reinforcing a growing view that state ownership is an obstacle to efficiency and innovation. The government sells some of its stakes in Volkswagen, Deutsche Telekom, Lufthansa, and the railroads through the stock market.

1998-2001: The new government strives to cut the budget while also reforming taxes (through tax cuts and fewer loopholes) and the pension and health care systems (by introducing private alternatives). The economy shows signs of growth in 2000 before lagging again. As of March 2002, unemployment in all of western Germany is 8.3 percent, compared to 19.1 in the former communist East.

2002-2003: A global slowdown, low business confidence, and an inflexible labor market combine to mire Germany in stagnation. Unemployment hovers around 10 percent -- or four million people. The budget deficit, at 3.6 percent of GDP, exceeds European Union rules. In late 2002 Wolfgang Clement becomes "super-minister" for economics and labor, with the difficult assignment of accomplishing labor market reform.

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Social

1910-1913: The welfare state is central to German identity since Chancellor Bismarck's creation of the first modern pension system in the 1880s to undermine socialism and ensure stability. Many features of the system remain in place today: mandatory insurance, benefits tied to earnings, and use of decentralized private associations to carry out national policy.

1914-1918: Needs of wartime production increase workers' bargaining power, and benefits continue to be extended up the social ladder. The retirement age is lowered.

1919-1932: Unemployed veterans are a major problem, and Weimar governments modernize and expand programs such as unemployment insurance and public assistance. The Depression undermines many of these programs, which depend on worker contributions. Hitler's National Socialist Party exploits this lack of an effective safety net in recruiting followers. Ambitious plans for universal education are not realized.

1933-1945: In 1933 Hitler disbands the labor movement and strips Jews of citizenship. Jews, dissidents, and other minorities are put in concentration camps, where they are forced to work or killed outright. The Reich centralizes social programs and education as a means of control. The regime extends health insurance to retirees in 1941, and expands health care and maternity leave the following year.

1946-1947: Five million Germans die during the war, and many families are left homeless or divided. A ruined economy and global food crisis force many Germans to eat only a quarter of their prewar diet. Allied efforts to create a uniform benefits system are rejected. The old network of decentralized administration of social programs by non-government associations, with labor and business input, is restored.

1948-1962: The scale of devastation and historical focus on welfare lead Ordoliberals to mix a free market with social programs. In 1950 unemployment reaches 10 percent but will fall to 1 percent in a decade. Cooperation among state, business, and labor, plus public regard for health and safety, contribute to a responsible work environment. Comprehensive programs retain inequities towards women and the poor.

1963-1969: In 1963, at the height of the economic miracle, social spending reaches almost 20 percent of GDP. To meet demand for labor, farm workers are first absorbed, contributing to the depopulation of the countryside. Foreign "guest workers" are recruited from Turkey, Italy, and later Yugoslavia. Many will stay permanently, bringing their families to join them.

1970-1982: Benefits such as health insurance for students and the disabled are expanded further in the 1970s. But attempts to make benefits uniform across occupations are not successful. The SPD-FDP coalition makes divorce and abortion easier and reforms the education system to reduce unequal access. Efforts to rein in health care costs begin.

1983-1988: Unemployment rises to 6.4 percent. Chancellor Helmut Kohl's platform includes reducing state spending, but reducing benefits is politically difficult. To reduce health care spending, cost-control measures and co-payments are introduced.

1989-1990: Reunification requires subsidies from the West, further straining a social budget that is already 10 times its 1960 level. Some benefits, such as unemployment insurance, are extended to the former East Germany, while others are reduced, such as health and child care coverage. The gap in unemployment and manufacturing in East and West further strains the collective bargaining system.

1991-1998: European integration raise fears that workers will be hurt by privatization and spending cuts. High unemployment, an aging population, and low birth rates make generous social benefits increasingly untenable. Unemployment at the end of 1996 reaches of 11.4 percent, and the IMF urges reforms of the "German model," such as labor market deregulation and a contraction of the welfare state.

1999-2001: Continued unemployment challenges the old labor and welfare models. The state works with labor and business on wages, retirement, hours, and training to increase flexibility and competitiveness. Collective bargaining still calls for uniform wages and hours across diverse regions and firms. More firms try to negotiate outside the system, and unions increase activity to respond to these threats.

2002-2003: The strong showing of the Greens in the 2002 elections confirms the political maturity of the movement and the entrenchment in German society of environmentalist and anti-militarist ideas. Economic stagnation brings changes: More Germans seek work abroad, and long-fixed shopping hours are extended at home. In a ray of good news, Germany reaches the finals of soccer's 2002 World Cup.

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Environmental

1939-1944: Arms production at full capacity adds to pollution, while bombing destroys urban centers and economic infrastructure. Some 125 weapons production sites, a fourth of them used to manufacture of chemical weapons, leave a legacy of contamination that is not dealt with for many years.

1945-1965: Arms production sites are razed, although many hazardous chemicals remain in the ground. The priority placed on recovery and then growth means that little attention is paid to the environment. The large industrial sector causes air pollution problems, and the Rhine and the Main nearly become "dead" rivers.

1966-1972: As the economy seems more secure and the environmental movement gathers momentum worldwide, Germans become more concerned about the effects of growth. The government responds with laws on waste and emissions, establishing the principles of Germany's environmental policy: screening for pollution, the "polluter pays" for damages, and collaboration between government, business, and society.

1973-1979: The oil shocks force reduced dependence on foreign oil for economic reasons. This leads to increased energy efficiency, but also to reliance on nuclear power. Environmental groups, concerned with pollution and acid rain at home and abroad, increase in number and voice, and begin to put forth political candidates. The Federal Environmental Agency is created.

1980-1989: Environment, peace, and women's organizations form a new party, the Greens, urging disarmament, responsible growth, and withdrawal from NATO. Although not yet a major force, the Greens grow in influence and bring environmental issues to the mainstream. After Chernobyl, Kohl creates the Ministry of Environment, Nature Conservation, and Reactor Safety, and new controls make air and water cleaner.

1990-1997: Reunification brings enormous environmental problems, estimated at DM400 billion at one point. In the East there were few laws, little enforcement, and a priority of industrial growth over all else. Global warming concerns become increasingly prominent. An extensive Soil Conservation Law mandates cleanup of contaminated land.

1998-2003: The Social Democrats join with the Greens to form a coalition government. In 2000 the government begins to phase out nuclear power, which accounts for 40 percent of electricity consumption. Less nuclear power is likely to require more coal burning. A 2001 shipment of nuclear waste from France sparks protests. The southeast is hit by devastating floods in 2002. Greens push through a bottle-deposit law.

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Rule of Law

1910-1918: Built on tribal, Roman, Holy Roman Empire, feudal, Napoleonic, and church law, the German legal system is over the centuries integrated into formal codes in the different principalities and territories. Some laws, such as commercial laws, are increasing integrated as political unity progresses.

1919-1932: The Weimar Constitution enshrines key rights in law, although state-of-emergency provisions are used locally in 1920 and 1921. Hitler will later draw on these precedents on a larger scale. The constitution is also under threat from extremists willing to use force to end the republic. Uneven handling of illegal actions by the left and right sends a signal that rightist power grabs will be tolerated.

1933-1938: Jewish properties are arbitrarily confiscated and widespread human rights abuses sanctioned by a broadened Criminal Code. Special courts, some imposing the death penalty, spring up with no clear legal basis. Internal security bodies such as the Gestapo and the SS brutally enforce Nazi policies. Police and courts may ignore rule of law whenever deemed necessary.

1939-1944: Nazi control is enforced by fear, the Gestapo secret police, and an extensive network of police informers. Mass murder of unwanted racial and cultural groups becomes state policy, carried out in concentration and extermination camps. Inmates are subjected to endless abuses and are used as slave labor in factories.

1945-1948: Germany's division into four zones leads to differing applications of law in each sector. The Nuremberg trials mark a watershed in accountability for war crimes, although inconsistent prosecution and denazification measures allow some high-ranking Nazis to escape punishment.

1949-1967: The constitution ensures rule of law (Rechtsstaat) through judicial independence, equality before the law, and freedom of speech, assembly, press, and religion. Experience with fascism leads to limits on anti-democratic extremism, and neo-Nazi and communist parties are soon banned. The constitution guarantees property and inheritance and permits expropriation only for the public welfare.

1968-1979: Student protests and far-left violence begins in the late '60s and '70s, as the Baader-Meinhof Gang carries out kidnappings and a hijacking. After the killing of Israeli athletes by terrorists at the Munich Olympics, a special counter-terrorist unit is formed, successfully storming a hijacked Lufthansa jet in 1977.

1980-1989: Political party scandals undermine the public's view of the parties, contributing to a fall-off in membership and voting. Terrorist activities wane as radical groups lose support.

1990-1998: Reunification brings complex legal issues, such as millions of claims on expropriated property. Accountability for past crimes remains problematic: East German border guards are tried for shooting escapees, but higher-ups are not brought to justice. Right-wing violence increases as extremists firebomb foreign worker hostels and attack others.

1999-2003: Once tax-deductible, overseas bribes are now criminalized. The defense minister resigns in 2002 under accusations of unethical private-sector payments; the justice minister is forced out after comparing George W. Bush's tactics to Hitler's. Germany won't furnish evidence in the U.S. trial of alleged terrorist Zacharias Moussaoui because he may face the death penalty, which Europeans oppose.

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Trade Policy

1910-1913: Exports account for 18 percent of Germany's GDP, and Germany is the number two exporter at the turn of the century. Industrial cartels influence foreign trade, while tariffs protect primary goods in particular from foreign competition.

1914-1918: British blockades and German U-boats hamper shipping and make trade difficult.

1919-1932: Exports decline to 15 percent of GDP in the late '20s. Foretelling the Nazi goal for self-reliance, Hitler writes in "Mein Kampf," "[W]e are finally putting a stop to the colonial and trade policy of the prewar period and passing over to the territorial policy of the future."

1933-1944: The Nazi regime aims for economic self-sufficiency (autarchy) through industrial policy and bartering for raw materials with nearby states. The shift away from trade-oriented growth, together with the global depression, contributes to a fall in trade to only 6 percent of GDP in the late '30s. Once war begins, occupied territories are exploited for raw materials and labor.

1945-1949: The occupation government reverses Nazi policies of economic self-sufficiency, but the ruined infrastructure and halting economy throughout Europe limit opportunities for trade. The Marshall Plan helps reintegrate Germany into the slowly reviving European economy.

1950-1956: Germany joins the European Coal and Steel Community, a free-trade arrangement that will develop into the European Union. Increasingly open trade in Europe and the world helps Germany's rapidly growing export economy. A long period of consistent trade surpluses begins.

1957-1970: Germany helps found the European Economic Community through the Treaty of Rome in 1957, boosting Germany's export economy. Germany's famed engineering prowess allows production of high-quality manufactured exports that drive the economic miracle. Exports rise from 17 percent of GDP to 24 percent in 1970; trade surpluses will persist until 1990.

1971-1980: Exports rise slightly to 27 percent in 1980. But the oil shocks strain the balance of payments through the effect of oil imports and negative impacts on domestic industry such as steel. The first signs that some of Germany's traditional sectors such as machinery and chemicals may be losing competitiveness are met with subsidies.

1981-1990: Germany enjoys big trade surpluses during the second half of the decade, briefly becoming the world's largest exporter. The economy is increasingly tilted towards services, but Germany's manufacturing industry remains important.

1991-1999: Following reunification with the East, Germany has big trade deficits. Globalization raises fears that Germany's core exports - steel, machinery, chemicals -- can be made cheaper elsewhere, and Germany will not be able to keep ahead in a high-technology-driven global economy. Complex safety laws are an often unintended barrier to foreign goods.

2000-2003: Germany registers a trade surplus, thanks in part to some export gains, but mostly to a drop in imports resulting from the persistent weakness of domestic demand. The rise of the euro against the dollar in 2002-03 makes German exports more expensive and sparks fears the surplus may be short-lived.

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Money

1910-1914: Following the birth of a central monetary authority in 1876, Germany participates in the prewar gold standard. Monetary policy reflects Germany's typical concern for controlling inflation until the outbreak of war.

1915-1918: Like most countries, Germany suspends the gold standard for the war. The war is financed not by taxes but by bonds, in the expectation of post-victory payments from other countries. This bet makes it difficult to negotiate an end to the war, as peace without victory would make honoring the bonds impossible.

1919-1928: War debt and reparations lead to the printing of huge sums of currency, causing high inflation. The Weimar Republic still evokes images of wheelbarrows of currency for everyday shopping. In 1923 a U.S. dollar is worth more than four trillion marks. The U.S.-led Dawes Plan briefly alleviates the reparations problem in 1924. Reducing payments and making loans available, it restores relative stability.

1929-1932: The Dawes Plan is followed by the Young Plan, which sets reparations at $25 billion (approximately $267 billion in 2001 dollars) over nearly 60 years. The plan, implemented in 1930, is abandoned because of the onset of the Depression and Hitler's rise to power. The Depression also causes U.S. creditors to call in their debts, and the situation worsens.

1933-1938: Deficit spending and massive rearmament contributes to falling unemployment, and the 1936 Four-Year Plan further increases spending and state control. Despite declaring that they have no use for gold, the Nazis amass gold through confiscation and other means, which proves crucial for maintaining the economy and later financing the war.

1939-1944: Rationing plus price and wage controls restrain inflation for much of the war despite large increases in the money supply to finance military spending. War funds come largely from mandatory loans and credits from German financial institutions as well as expropriations from occupied territories.

1945-1947: The currency falls to 1/500th of its value, and cognac and American cigarettes become common units of trade.

1948-1956: In June 1948 the United States and Great Britain replace the worthless Reichsmark in a sudden currency reform. Keenly aware of inflation's role in Hitler's rise, the Ordoliberals underline the importance of a strong currency, and the Deutsche Mark (DM) grows steadily from the 1950s on. Chancellor Adenauer commits Germany to reparations payments to victims of Nazi atrocities.

1957-1959: The Bundesbank is created with significant autonomy and the primary goal of fighting inflation. Critics charge that the inflation obsession hurts employment and growth, but the memory of the destructive effects of inflation are strong. Monetary policy is controlled through short-term interest. Becoming fully convertible in 1958, the DM stands out for its strength and stability.

1960-1966: The Bundesbank helps put the brakes on the fast-growing economy out of fear of its principal nemesis, inflation. As chancellor, Ludwig Erhard tries to support the dollar as the Bretton Woods system comes under stress. The weak economy in 1966 contributes to the end of the Christian Democrats' long run in power.

1967-1971: The next two coalition governments look to a more Keynesian style of planning as a way out the downturn. The Law for Promoting Stability and Growth sets targets for currency stability. Despite pressure from the United States to revalue, the government fears harming exports if the mark is allowed to appreciate. The Bretton Woods system of fixed exchange rates ends in 1971.

1972-1982: European countries try to link their currencies within narrow bands, but the global systems shifts to floating currency in 1973. Despite the efforts of the Bundesbank, problems plague the economy, even seeing both high unemployment and inflation in 1981. Floating rates increase flexibility, but raise fears that the Bank's anti-inflation efforts will keep the value of the DM too high for exports.

1983-1988: The influence of banks on major companies through board membership comes under pressure from European Union rules.

1989-1990: Currency is a key challenge of reunification. Longtime Bundesbank president Karl-Otto Pöhl decides to move cautiously to keep East German goods competitive. But the politicians suddenly announce a unified currency, causing economic dislocation in the rusted-out East. After 1990 the Bank keeps interest rates high to prevent inflation, affecting growth and jobs across Europe.

1991-1998: The Maastricht Treaty commits Europe to a unified currency and a European central bank and mandates limits on inflation, deficits, and debt. Some Germans worry that a common currency will make monetary policy too soft. Other Europeans fear the reverse, but hope to have more say in European monetary policy than before, when the Bundesbank made unilateral decisions that affected the continent.

1999-2003: The euro is born, used at first for government and corporate accounting. The European Central Bank, based in Frankfurt, is modeled on the independence of the Bundesbank and emulates its anti-inflationary stance. On New Year's Day 2002, the euro enters full circulation, and the Deutsche Mark is retired. Shopkeepers are accused of taking advantage of the changeover to raise prices.

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Categories: Overview | Political | Economic | Social | Environmental | Rule of Law | Trade Policy | Money
Graphs: Growth | Income | Inflation | Unemployment | Well-being | Trade Volume | Trade (CAB) | Debt | Spending

Related: Video | LinksView all categories for years from to | See Full Report | Print