Germany economy Essay Example | Topics and Well Written Essays - 3250 words

Germany economy - Essay Example In 1948, the Soviets withdrew from the four-power governing bodies and initiated the Berlin blockade, which lasted 11 months. On May 23, 1949, the Federal Republic of Germany (FRG) was established on the territory of the Western Occupied zones and declared full sovereignty on May 5, 1955. On October 7, 1949, the German Democratic Republic (GDR) was established in the Soviet zone with East Berlin as its capital. From that time on, the two largest states were known as "West Germany" and "East Germany," Berlin was divided into East Berlin and West Berlin, with West Berlin completely surrounded by East German territory. As a western capitalist country, West Germany enjoyed prolonged economic growth, while East Germany soon became the richest, most advanced country in the Soviet bloc. Even so, many of East Germany's citizens looked to the West for political freedoms and economic prosperity. In 1989 the Berlin wall was removed, and German reunification finally took place on October 3, 1990 , when the GDR was incorporated into the FRG (History 2007). Its per capita income of more than $28,700 makes Germany a broadly middle class society (Background 2007). In the western part of the country, Germany's standard of living is among the highest in the world, with powerful incentives to save offered by the state. Earning power for both workers and employers assures income to meet cost of living. There is no exaggerated difference between compensation for blue-collar workers and white-collar employees. In 1990, the absorption of the eastern German population and economy into western Germany had only a marginal effect on western living standards. On the other hand, East Germany, with its lower earning power suddenly had to pay West German prices, and the wholesale shutdown of former state factories and enterprises caused vast unemployment in industrial cities (Germany: Standards of Living 2007). Third quarter growth for Germany in 2007 was at its strongest for the year, boosted by higher spending on company machinery and construction. The prediction, however, for the fourth quarter and into 2008 is for slower growth due to high oil prices and a strong euro. But the latest preliminary gross domestic product (GDP) figures suggest Germany is on track for annual growth of about 2.5 percent, which would be one of the best performances in the past 15 years. The euro's rise against the dollar increases expenses for exporters while high energy costs are impinging on company profits (Germany Grows 2007). More attention should be paid to domestic product than to capital gains. Poverty With welfare reforms scheduled to be implemented in 2005, social organizations were warned of a dramatic increase in the number of poor people in Germany (Corbett 2004). Corbett stated that according to an association of German charities, the number of poor people in Germany were expected to increase from 2.8 million to 4.5 million-almost double. The average income in 2004 was roughly 2,200 ($2,700) a month but by counting the number of people living on the lowest level of social welfare assistance, the charitable organizations note that after the reform HartzIV, these people would have a monthly