Country Listing

Germany Table of Contents


The Role of Government and Other Institutions

The Federal Government Role

The German federal government plays a crucial role in the German economy, sometimes directly and sometimes indirectly through the effects of other policies on the economy. Unlike the Japanese government, there is no single ministry that attempts to direct industrial government and competitiveness, but government policy can have wide-ranging effects because of the many offices that play a role.

The three principal figures responsible for economic policy are the chancellor, the minister for economics, and the minister of finance. The three positions have rarely been held simultaneously by members of a single party and are usually divided among two or sometimes three parties. Economic policy therefore has to reflect the interests of at least two political parties, with all that this means in terms of compromise and conciliation. The coalition negotiations to form a new government after a national election are never more delicate or more difficult than when they touch on economic policies.

The main parties have different economic philosophies and pursue generally different objectives. The CDU and the CSU are conservative, business-oriented parties, but with a long tradition of support for social welfare programs. The FDP is liberal in the British sense, very much in favor of the free market and a minimum of government regulation. The SPD believes in combining political freedom with large social programs and government involvement in the economy. It is impossible for any of the three parties to be in a government with the others without yielding something, and government policy has therefore usually contained a mixture of sometimes contradictory objectives that then must be resolved by compromises within the cabinet.

Data as of August 1995