2014 Index of Economic Freedom

Germany

overall score73.4
world rank18
Rule of Law

Property Rights90.0

Freedom From Corruption80.1

Limited Government

Government Spending38.2

Fiscal Freedom61.2

Regulatory Efficiency

Business Freedom89.9

Labor Freedom46.4

Monetary Freedom80.8

Open Markets

Trade Freedom87.8

Investment Freedom90.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 81.9 million
  • GDP (PPP):
    • $3.2 trillion
    • 0.9% growth
    • 0.7% 5-year compound annual growth
    • $39,028 per capita
  • Unemployment:
    • 5.5%
  • Inflation (CPI):
    • 2.1%
  • FDI Inflow:
    • $6.6 billion
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Germany’s economic freedom score is 73.4, making its economy the 18th freest in the 2014 Index. Its overall score is 0.6 point better than last year, reflecting modest improvements in investment freedom, labor freedom, and trade freedom. Germany is ranked 8th out of 43 countries in the Europe region, and its score exceeds the world and regional averages.

Over the 20-year history of the Index, Germany’s economic freedom has advanced by nearly 4 points. Its 2014 score is its highest ever. Double-digit gains have been achieved in the areas of market openness and limited government. High levels of trade freedom and investment freedom continue to underpin Germany’s competitiveness in global commerce and ensure dynamic economic growth.

During the first half of its history in the Index, Germany was rated one of the “moderately free” economies, but since 2006, it has steadily advanced to the ranks of the “mostly free” as one of the top 20 freest economies. Though its overall progress has been good, labor freedom remains significantly below world averages, and business freedom has slipped a bit from previous highs.

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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, failed to cross the 5 percent threshold and is no longer in the Bundestag. As of October 2013, coalition negotiations with the Social Democrat Party and the Green Party were ongoing. Economic reforms remain stalled because of an almost exclusive focus on rescuing the euro. Germany has funded the lion’s share of large rescue packages for fellow eurozone members Greece and Cyprus. Germany and France have been the key proponents of the European Union’s January 2013 Fiscal Compact Treaty. Germany’s industrialized economy, the largest in Europe, is well integrated into the global marketplace and generates average per capita incomes that are among the highest in the world. Germany has one of the lowest unemployment rates in Europe and 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 80.1 Create a Graph using this measurement

Property owned by foreigners is fully protected under German law, and secured interests in property are recognized and enforced. Although government transparency is high and anti-corruption measures are enforced effectively, the construction and health sectors and public contracting represent areas of continued concern, particularly in conjunction with questionable political party influence and party donations.

Limited GovernmentView Methodology

The top individual income tax rate has risen to 47.5 percent, and the top corporate tax rate remains at 15.8 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. Tax revenue is equal to 37 percent of GDP. Public spending has stabilized at 45 percent of the domestic economy, and public debt has remained steady at around 80 percent of GDP.

Regulatory EfficiencyView Methodology

The overall entrepreneurial environment remains one of the world’s most transparent and efficient. The business start-up process is straightforward, with no minimum capital required. Labor relations are sound, and employers and workers have worked cooperatively to adjust wages and work hours in response to the changing economic environment. Monetary stability is well maintained, although the government subsidizes the cost of renewable power.

Open MarketsView Methodology

EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Investment in a few sectors of the economy may be subject to government screening, but the government generally does not discriminate against foreign investment. The competitive financial sector remains largely stable, offering a full range of services. The traditional three-tiered system of private, public, and cooperative banks remains intact.

Country's Score Over Time

Bar Graph of Germany Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Germany to other economic country groups

Regional Ranking

rank country overall change
1Switzerland81.60.6
2Ireland76.20.5
3Denmark76.10.0
4Estonia75.90.6
5United Kingdom74.90.1
6The Netherlands74.20.7
7Luxembourg74.20.0
8Germany73.40.6
9Finland73.4-0.6
10Sweden73.10.2
11Lithuania730.9
12Georgia72.60.4
13Iceland72.40.3
14Austria72.40.6
15Czech Republic72.21.3
16Norway70.90.4
17Belgium69.90.7
18Armenia68.9-0.5
19Latvia68.72.2
20Macedonia68.60.4
21Cyprus67.6-1.4
22Spain67.2-0.8
23Poland671.0
24Hungary 67-0.3
25Albania66.91.7
26Slovakia66.4-2.3
27Malta66.4-1.1
28Bulgaria65.70.7
29Romania65.50.4
30Turkey64.92.0
31Montenegro63.61.0
32Portugal63.50.4
33France63.5-0.6
34Slovenia62.71.0
35Italy60.90.3
36Croatia60.4-0.9
37Serbia 59.40.8
38Bosnia and Herzegovina58.41.1
39Moldova57.31.8
40Greece55.70.3
41Russia51.90.8
42Belarus50.12.1
43Ukraine49.33.0
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