2015 Index of Economic Freedom

Germany

overall score73.8
world rank16
Rule of Law

Property Rights90.0

Freedom From Corruption78.0

Limited Government

Government Spending40.1

Fiscal Freedom60.8

Regulatory Efficiency

Business Freedom88.2

Labor Freedom51.2

Monetary Freedom81.5

Open Markets

Trade Freedom88.0

Investment Freedom90.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 80.8 million
  • GDP (PPP):
    • $3.2 trillion
    • 0.5% growth
    • 0.7% 5-year compound annual growth
    • $40,007 per capita
  • Unemployment:
    • 5.3%
  • Inflation (CPI):
    • 1.6%
  • FDI Inflow:
    • $26.7 billion
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Germany’s economic freedom score is 73.8, making its economy the 16th freest in the 2015 Index. Its overall score is up by 0.4 point from last year, with improvements in the management of public spending and labor freedom outweighing declines in freedom from corruption and business freedom. Germany is ranked 7th out of 43 countries in the Europe region, and its score exceeds the world and regional averages.

Germany has achieved its highest score ever in the 2015 Index. Since 2011, a 2.0-point increase in economic freedom has been led by marked improvements in labor freedom and in policy areas related to market openness. Overall, economic freedom has increased in five of the 10 measured categories.

Germany’s judicial system, independent and free of corruption, enforces contracts reliably. Openness to global trade and investment has enabled Germany to become one of the world’s most competitive and flexible economies. The government has held firm to policies emphasizing sound public finance, keeping spending under control through deficit-cutting measures. In response to changing economic conditions, employers and workers have worked to adjust wages and work hours.

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Background

Chancellor Angela Merkel’s Christian Democratic Union won the biggest share of the national vote in the September 2013 election, but its coalition partner, the economically liberal Free Democratic Party, is no longer in the Bundestag. In December 2013, Merkel’s party reached an agreement with the Social Democratic Party to form a coalition government. Economic reforms remain stalled, with most policy attention focused on rescuing the euro. Germany has funded the lion’s share of large rescue packages for fellow eurozone members. Its industrialized economy, the largest in Europe, is well integrated into the global marketplace and generates average per capita incomes that are among the world’s highest. Germany has one of Europe’s lowest unemployment rates, and shortages of skilled labor may be developing. Germany remains, both politically and economically, the most influential nation in the EU.

Rule of LawView Methodology

Property Rights 90.0 Create a Graph using this measurement

Freedom From Corruption 78.0 Create a Graph using this measurement

Although government transparency is high and anti-corruption measures are enforced effectively, the auto industry, construction, and public contracting, in conjunction with questionable political party influence and party donations, are areas of continuing concern. Property owned by foreigners is fully protected under German law, and secured interests in both chattel and real property are recognized and enforced.

Limited GovernmentView Methodology

Germany’s top individual income tax rate is 47.5 percent, and its top corporate tax rate is 15.8 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 37.6 percent of domestic output. Government expenditures are equivalent to 44.7 percent of gross domestic product, and public debt is equal to 75 percent of domestic output.

Regulatory EfficiencyView Methodology

The regulatory regime supports innovative business formation and operation. Starting a business takes nine procedures and costs about 9 percent of the level of average annual income. Labor regulations are rigid, with broad wage settlements and high unionization. Monetary stability is well maintained, although the government uses a surcharge on monthly electricity bills to subsidize the cost of renewable power generation.

Open MarketsView Methodology

EU members have a 1.0 percent average tariff rate. Although some non-tariff barriers exist, the EU is relatively open to external trade. Germany generally applies the same rules to foreign and domestic investment. The competitive financial sector remains dynamic and well developed, offering a full range of financing options. Despite consolidation, the traditional three-tiered system of private, public, and cooperative banks is intact.

Country's Score Over Time

Bar Graph of Germany Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Switzerland80.5-1.1
2Estonia76.80.9
3Ireland76.60.4
4Denmark76.30.2
5United Kingdom75.80.9
6Lithuania74.71.7
7Germany73.80.4
8The Netherlands73.7-0.5
9Finland73.40.0
10Luxembourg73.2-1.0
11Georgia730.4
12Sweden72.7-0.4
13Czech Republic72.50.3
14Iceland72-0.4
15Norway71.80.9
16Austria71.2-1.2
17Latvia69.71.0
18Belgium68.8-1.1
19Poland68.61.6
20Cyprus67.90.3
21Spain67.60.4
22Slovakia67.20.8
23Armenia67.1-1.8
24Macedonia67.1-1.5
25Hungary 66.8-0.2
26Bulgaria66.81.1
27Romania66.61.1
28Malta66.50.1
29Albania65.7-1.2
30Portugal65.31.8
31Montenegro64.71.1
32Turkey63.2-1.7
33France62.5-1.0
34Italy61.70.8
35Croatia61.51.1
36Slovenia60.3-2.4
37Serbia 600.6
38Bosnia and Herzegovina590.6
39Moldova57.50.2
40Greece54-1.7
41Russia52.10.2
42Belarus49.8-0.3
43Ukraine46.9-2.4
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