Economy of Germany
has a highly developed social market economy. It is the largest national economy in Europe, the third-largest by nominal GDP in the world, and the sixth-largest by PPP-adjusted GDP. Due to a volatile currency exchange rate, Germany's GDP as measured in dollars fluctuates sharply, but it is among the world's top 4 since 1960. In 2025, the country accounted for 23.7% of the Euro area economy according to the International Monetary Fund. Germany is a founding member of the European Union and the eurozone.
Germany is the third-largest exporter globally with $1.66 trillion worth of goods and services exported in 2024. In 2024, Germany recorded a trade surplus worth $255 billion, ranking 2nd worldwide. The service sector contributes around 70% of the total GDP, industry 29.1%, and agriculture 0.9%. Exports accounted for 50.3% of national output. The top 10 exports of Germany are vehicles, machinery, chemical goods, electronic products, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, and rubber and plastics. Germany is the largest manufacturing economy in Europe, contributing around one third of all manufacturing in Europe. Among OECD members, Germany has a highly efficient and strong social security system, which comprises roughly 25% of GDP.
Germany is rich in timber, lignite, potash, and salt. Some minor sources of natural gas are being exploited in the state of Lower Saxony. Until German reunification, the German Democratic Republic mined for uranium in the Ore Mountains. Energy in Germany is sourced predominantly by fossil fuels, with wind power in second place, then gas, solar, biomass, and hydro. Germany is the first major industrialised nation to commit to the renewable energy transition called Energiewende. Renewables produced 46% of electricity consumed in Germany. Germany has been called "the world's first major renewable energy economy". Germany has the world's second-largest gold reserve, with over 3,000 tonnes of gold. As of 2023, Germany spends around 3.1% of GDP, third among major economies, on research and development. It is also the world's second-largest high-technology exporter and ranks in the top 10 of countries by stock market capitalization. During the 2020s, Germany faced significant economic troubles.
More than 99 percent of all German companies belong to the German "Mittelstand", mostly family-owned small and medium-sized enterprises. These companies represent 48% of the global market leaders in their segments, labelled hidden champions. Of the world's 500 largest publicly listed companies measured by revenue, the Fortune Global 500, 29 are headquartered in Germany, as are 26 of Europe's 100 largest. Germany is home to many financial centres and economically important cities, such as Berlin, Hamburg, Munich, Cologne, Frankfurt, and Stuttgart. Four German banks are among the biggest in the world. Germany is the world's top location for trade fairs; around two thirds of the world's leading trade fairs take place in Germany. Some of the largest international trade fairs and congresses are held in several German cities such as Hanover, Frankfurt, Cologne, Leipzig, and Düsseldorf.
History
Age of Industrialisation
The Industrial Revolution in Germany got underway approximately a century later than in the United Kingdom, France, and Belgium, partly because Germany only became a unified country in 1871.The establishment of the Deutscher Zollverein in 1834 and the expansion of railway systems were the main drivers of Germany's industrial development and political union. From 1834, tariff barriers between increasing numbers of the Kleindeutschland German states were eliminated. In 1835 the first German railway linked the Franconian cities of Nuremberg and Fürth – it proved so successful that the decade of the 1840s saw "railway mania" in all the German states. Between 1845 and 1870, of rail had been built and in 1850 Germany was building its own locomotives. Over time, other German states joined the customs union and started linking their railroads, which began to connect the corners of Germany. The growth of free trade and a rail system across Germany intensified economic development which opened up new markets for local products, created a pool of middle managers, increased the demand for engineers, architects, and skilled machinists, and stimulated investments in coal and iron.
Another factor that propelled German industry forward was the unification of the monetary system, made possible in part by political unification. The Deutsche Mark, a new monetary coinage system backed by gold, was introduced in 1871. However, this system did not fully come into use as silver coins retained their value until 1907.
The victory of Prussia and her allies over Napoleon III of France in the Franco-Prussian War of 1870-1871 marked the end of French hegemony in Europe and resulted in the proclamation of the German Empire in 1871. The establishment of the empire inherently presented Europe with the reality of a new populous and industrialising polity possessing a considerable, and undeniably increasing, economic and diplomatic presence. The influence of French economic principles produced important institutional reforms in Germany, including the abolition of feudal restrictions on the sale of large landed estates, the reduction of the power of the guilds in the cities, and the introduction of a new, more efficient commercial law. Nonetheless, political decisions about the economy of the empire were still largely controlled by a coalition of "rye and iron", that is the Prussian Junker landowners of the east and the Ruhr heavy industry of the west.
Regarding politics and society, between 1881 and 1889 Chancellor Otto von Bismarck promoted laws that provided social insurance and improved working conditions. He instituted the world's first welfare state. Germany was the first to introduce social insurance programmes including universal healthcare, compulsory education, sickness insurance, accident insurance, disability insurance, and a retirement pension. Moreover, the government's universal education policy bore fruit with Germany achieving the highest literacy rate in the world – 99% – education levels that provided the nation with more people good at handling numbers, more engineers, chemists, opticians, skilled workers for its factories, skilled managers, knowledgeable farmers, and skilled military personnel.
By 1900, Germany surpassed Britain in steel production and became the largest producer behind only the United States. The German economic miracle was also intensified by unprecedented population growth from 35 million in 1850 to 67 million in 1913. From 1895 to 1907, the number of workers engaged in machine building doubled from half a million to well over a million. Only 40 percent of Germans lived in rural areas by 1910, a drop from 67% at the birth of the Empire. Industry accounted for 60 percent of the gross national product in 1913. The German chemical industry became the most advanced in the world, and by 1914 the country was producing half the world's electrical equipment.
The rapid advance to industrial maturity led to a drastic shift in Germany's economic situation – from a rural economy into a major exporter of finished goods. The ratio of the finished product to total exports jumped from 38% in 1872 to 63% in 1912. By 1913 Germany had come to dominate all the European markets. By 1914 Germany had become one of the biggest exporters in the world.
Weimar Republic and Third Reich
The Nazis rose to power while unemployment was very high, but achieved full employment later thanks to massive public works programmes such as the Reichsbahn, Reichspost, and the Reichsautobahn projects. In 1935 rearmament in contravention of the Treaty of Versailles added to the economy.The post-1931 financial crisis economic policies of expansionary fiscal policies was advised by their non-Nazi Minister of Economics, Hjalmar Schacht, who in 1933 became the president of the central bank. Schacht later resigned from the post in 1938 and was replaced by Hermann Göring.
The trading policies of the Third Reich aimed at self-sufficiency, but with a lack of raw materials, Germany had to maintain trade links but on bilateral preferences, foreign exchange controls, import quotas, and export subsidies under what was called the "New Plan" of September 19th, 1934. The "New Plan" was based on trade with less developed countries who would trade raw materials for German industrial goods saving currency. Southern Europe was preferable to Western Europe and North America as there could be no trade blockades. This policy became known as the Grosswirtschaftsraum policy.
Eventually, the Nazi party developed strong relationships with big business and abolished trade unions in 1933 in order to form the Reich Labour Service, German Labour Front to set working hours, Beauty of Labour which set working conditions, and Strength through Joy to ensure sports clubs for workers.
West Germany
Beginning with the replacement of the Reichsmark with the Deutsche Mark as legal tender, a lasting period of low inflation and rapid industrial growth was overseen by the government led by German Chancellor Konrad Adenauer and his minister of economics, Ludwig Erhard, raising West Germany from total wartime devastation to one of the most developed nations in modern Europe.In 1953 it was decided that Germany was to repay $1.1 billion of the aid it had received. The last repayment was made in June 1971.
Apart from these factors, hard work and long hours at full capacity among the population in the 1950s, 1960s, and early 1970s and extra labour supplied by thousands of Gastarbeiter provided a vital base for the economic upturn.
East Germany
By the early 1950s, the Soviet Union had seized reparations in the form of agricultural and industrial products and demanded further heavy reparation payments. Silesia with the Upper Silesian Coal Basin, and Stettin, a prominent natural port, were lost to Poland.Exports from West Germany exceeded $323 billion in 1988. In the same year, East Germany exported $30.7 billion worth of goods; 65% to other communist states. East Germany had zero unemployment.
Car markers like the Automobilwerk Eisenach and the HQM Sachsenring GmbH produced icons of the East German economy like the Trabant line and the Wartburg line.