2016 Index of Economic Freedom

Germany

overall score74.4
world rank17
Rule of Law

Property Rights90.0

Freedom From Corruption79.0

Limited Government

Government Spending41.3

Fiscal Freedom61.5

Regulatory Efficiency

Business Freedom90.0

Labor Freedom50.6

Monetary Freedom83.3

Open Markets

Trade Freedom88.0

Investment Freedom90.0

Financial Freedom70.0

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Quick Facts
  • Population:
    • 81.1 million
  • GDP (PPP):
    • $3.7 trillion
    • 1.6% growth
    • 2.0% 5-year compound annual growth
    • $45,888 per capita
  • Unemployment:
    • 5.0%
  • Inflation (CPI):
    • 0.8%
  • FDI Inflow:
    • $1.8 billion
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Germany’s economy has been resilient in the face of global economic uncertainty. The government has held firm to sound public finance, and deficit-cutting efforts have kept public spending under control. Earlier labor market reforms that raised working-hour flexibility and reduced structural unemployment have helped to sustain the relatively robust job market.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 74.4 (up 0.6 point)
  • Economic Freedom Status: Mostly Free
  • Global Ranking: 17th
  • Regional Ranking: 8th in Europe
  • Notable Successes: Rule of Law and Open Markets
  • Concerns: Fiscal Freedom and Labor Freedom
  • Overall Score Change Since 2012: +3.4

Germany’s commitment to regulatory efficiency and open-market policies continues to be bolstered by the effective protection of property rights. The rule of law is well maintained, and a strong tradition of minimal tolerance for corruption is firmly institutionalized.

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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 economically liberal coalition partner, the Free Democratic Party, is no longer in the Bundestag. In December 2013, Merkel’s party formed a new coalition government with the Social Democratic Party. 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, which is Europe’s largest and well integrated into the global marketplace, generates average per capita incomes that are among the world’s highest. Growth has slowed, but Germany’s unemployment rate is still one of Europe’s lowest. 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 79.0 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 continued concern. The law fully protects property owned by foreigners, and secured interests in both chattel and real property are recognized and enforced.

Limited GovernmentView Methodology

The top individual income tax rate is 45 percent. The federal corporate tax rate is 15.8 percent (15 percent plus a 5.5 percent solidarity surtax). Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 36.7 percent of GDP. Government spending amounts to 44.3 percent of GDP. Public debt equals approximately 73 percent of GDP, but the fiscal balance is in surplus.

Regulatory EfficiencyView Methodology

The regulatory regime aids dynamic business formation. No minimum capital is required to launch a new business. The labor market functions well, and employers and workers have worked cooperatively in response to the changing economic environment. The government has cut subsidies for renewable energy sources but maintains price controls in other economic sectors, such as rental housing.

Open MarketsView Methodology

EU members have a 1 percent average tariff rate. Trade agreements are currently being negotiated with countries that include the United States and Japan. Foreign and domestic investors are generally treated equally under the law. The financial sector, competitive and largely stable, offers 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

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Regional Ranking

rank country overall change
1Switzerland810.5
2Ireland77.30.7
3Estonia77.20.4
4United Kingdom76.40.6
5Denmark75.3-1.0
6Lithuania75.20.5
7The Netherlands74.60.9
8Germany74.40.6
9Luxembourg73.90.7
10Iceland73.31.3
11Czech Republic73.20.7
12Georgia72.6-0.4
13Finland72.6-0.8
14Sweden72-0.7
15Austria71.70.5
16Norway70.8-1.0
17Latvia70.40.7
18Poland69.30.7
19Cyprus68.70.8
20Spain68.50.9
21Belgium68.4-0.4
22Macedonia67.50.4
23Armenia67-0.1
24Malta66.70.2
25Slovakia66.6-0.6
26Hungary 66-0.8
27Albania65.90.2
28Bulgaria65.9-0.9
29Romania65.6-1.0
30Portugal65.1-0.2
31Montenegro64.90.2
32France62.3-0.2
33Serbia 62.12.1
34Turkey62.1-1.1
35Kosovo61.4N/A
36Italy61.2-0.5
37Slovenia60.60.3
38Croatia59.1-2.4
39Bosnia and Herzegovina58.6-0.4
40Moldova57.4-0.1
41Greece53.2-0.8
42Russia50.6-1.5
43Belarus48.8-1.0
44Ukraine46.8-0.1
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