U.S. Department of State
Background Notes: Germany, May 2000
Released by the Bureau of European Affairs
Official Name: Federal Republic of Germany

PROFILE

Geography

Area: 357,000 sq. km. (137,821 sq. mi.); about the size of
Montana.
Cities: Capital--Berlin (population about 3.5 million).
Other cities--Hamburg (1.7 million), Munich (1.2 million),
Cologne (964,000), Frankfurt (647,000), Essen  (612,000),
Dortmund (597,000), Stuttgart (585,000), Dusseldorf
(571,000), Bremen (549,000), Hannover (523,000).
Terrain: Low plain in the north; high plains, hills, and
basins in the center and east; mountainous alpine region in
the south.
Climate: Temperate; cooler and rainier than much of the U.S.

People

Nationality: Noun and adjective--German(s).
Population (1998 est.): 82 million.
Ethnic groups: Primarily German; Danish minority in the
north, Sorbian (Slavic) minority in the east, 7.3 million
noncitizens.
Religions: Protestants slightly outnumber Roman Catholics.
Language: German.
Education: Years compulsory--10.  Attendance--100%.
Literacy--99%.
Health: Infant mortality rate (1998 est.)--5.2/1,000.
Life expectancy (1998 est.): Women 80 yrs., men 74 yrs.
Persons employed (1998 avg.): 34.1 million.
Persons unemployed (Feb. 1999): 4.5 million--11.6% of labor
force.

Government

Type: Federal republic.
Founded: 1949 (Basic Law, i.e., constitution, promulgated on
May 23, 1949). On October 3, 1990, the Federal Republic of
Germany and the German Democratic Republic unified in
accordance with Article 23 of the F.R.G. Basic Law.
Branches: Executive--president (titular chief of state),
chancellor (executive head of government).
Legislative--bicameral parliament. Judicial--independent,
Federal Constitutional Court.
Administrative divisions: 16 Laender (states).
Major political parties: Social Democratic Party (SPD);
Christian Democratic Union (CDU); Christian Social Union
(CSU); Alliance 90/Greens; Free Democratic Party (FDP);
Party of Democratic Socialism (PDS).
Suffrage: Universal at 18.

Economy

GDP (1998): $2.1 trillion.
Annual growth rate (1998): 2.8%.
Per capita income: $25,000.
Inflation rate--cost of living index (1998/97): 0.9%.
Natural resources: Iron, hard coal, lignite, potash, natural
gas.
Agriculture: Accounts for 1% of GDP. Products--corn, wheat,
potatoes, sugar, beets, barley, hops, viticulture, forestry,
fisheries.
Industry (35% of GDP): Types--iron and steel, coal,
chemicals, electrical products, ships, vehicles,
construction.
Trade (1998): Exports--$539 billion: chemicals, motor
vehicles, iron and steel products, manufactured goods,
electrical products. Major markets--France, U.S., U.K.
Imports--$467 billion: food, petroleum products,
manufactured goods, electrical products, automobiles,
apparel. Major suppliers--France, U.S., Netherlands.

PEOPLE

The population of Germany is primarily German. There are
more than 7 million foreign residents, including those
granted asylum, guest workers, and their dependents. Germany
is a prime destination for political and economic refugees
from many developing countries. An ethnic Danish minority
lives in the north, and a small Slavic minority, known as
the Sorbs, lives in eastern Germany.

Germany has one of the world's highest levels of education,
technological development, and economic productivity. Since
the end of World War II, the number of youths entering
universities has more than tripled, and the trade and
technical schools of the Federal Republic of Germany
(F.R.G.) are among the world's best. With a per capita
income level of more than $25,000, Germany is a broadly
middle class society. A generous social welfare system
provides for universal medical care, unemployment
compensation, and other social needs. Germans also are
mobile; millions travel abroad each year.

With unification on October 3, 1990, Germany began the major
task of bringing the standard of living of Germans in the
former German Democratic Republic (G.D.R.) up to that of
western Germany. This will be a lengthy and difficult
process due to the relative inefficiency of industrial
enterprises in the former G.D.R., difficulties in resolving
property ownership in eastern Germany, and the inadequate
infrastructure and environmental damage that resulted from
years of mismanagement under communist rule.

Drastic changes in the socioeconomic landscape brought about
by reunification have resulted in troubling social problems.
Economic uncertainty in eastern Germany is often cited as
one factor contributing to extremist violence, primarily
from the political right. Confusion about the causes of the
current hardships and a need to place blame have found
expression in harassment and violence by some Germans
directed toward foreigners, particularly non-Europeans. The
vast majority of Germans condemn such violence.

HISTORY

The rise of Prussian power in the 19th century, supported by
growing German nationalism, eventually ended interstate
fighting and resulted in the formation of the German empire
in 1871 under the chancellorship of Otto von Bismarck.
Although authoritarian in many respects, the empire
eventually permitted the development of political parties,
and Bismarck was credited with passing the most advanced
social welfare legislation of the age. Dynamic expansion of
military power, however, contributed to tensions on the
continent. The fragile European balance of power broke down
in 1914, and World War I and its aftermath, including the
Treaty of Versailles, led to the collapse of the German
empire.

Fascism's Rise and Defeat

The postwar Weimar Republic (1919-33) was an attempt to
establish a peaceful, liberal democratic regime in Germany.
This government was severely handicapped and eventually
doomed by economic problems and the inherent weakness of the
Weimar state. The inflation of the early 1920s, the world
depression of the 1930s, and the social unrest stemming from
the draconian conditions of the Versailles Treaty worked to
destroy the Weimar government from inside and out.

The National Socialist (Nazi) Party, led by Adolf Hitler,
stressed nationalistic themes and promised to put the
unemployed back to work. The party blamed many of Germany's
ills on alleged Jewish conspiracies. Nazi support expanded
rapidly in the early 1930s. Hitler was asked to form a
government as Reich Chancellor in January 1933. After
President Paul von Hindenburg died in 1934, Hitler assumed
that office as well. Once in power, Hitler and his party
first undermined then abolished democratic institutions and
opposition parties. The Nazi leadership attempted to remove
or subjugate the Jewish population in Germany and later, in
the occupied countries, forced emigration and, ultimately,
genocide. Hitler restored Germany's economic and military
strength, but his ambitions led Germany into World War II.
For Germany, World War II resulted in the destruction of its
political and economic infrastructures, led to its division,
and left a humiliating legacy.

After Germany's unconditional surrender on May 8, 1945, the
United States, the United Kingdom, and the U.S.S.R. occupied
the country and assumed responsibility for its
administration. The commanders in chief exercised supreme
authority in their respective zones and acted in concert on
questions affecting the whole country. France was later
given a separate zone of occupation.

Although the United States, the United Kingdom, and the
Soviet Union agreed at Potsdam in August 1945 to a broad
program of decentralization, treating Germany as a single
economic unit with some central administrative departments,
these plans failed. The turning point came in 1948, when the
Soviets withdrew from the Four Power governing bodies and
blockaded Berlin.  Until May 1949, West Berlin was kept
supplied only by an Allied airlift.

Political Developments in West Germany

The United States and the United Kingdom moved to establish
a nucleus for a future German government by creating a
central Economic Council for their two zones. The program
later provided for a West German constituent assembly, an
occupation statute governing relations between the Allies
and the German authorities, and the political and economic
merger of the French with the British and American zones.

On May 23, 1949, the Basic Law, the constitution of the
Federal Republic of Germany, was promulgated. The first
federal government was formed by Konrad Adenauer on
September 20, 1949. The next day, the occupation statute
came into force, granting powers of self-government with
certain exceptions.

The F.R.G. quickly progressed toward fuller sovereignty and
association with its European neighbors and the Atlantic
community. The London and Paris agreements of 1954 restored
full sovereignty (with some exceptions) to the F.R.G. in May
1955 and opened the way for German membership in the North
Atlantic Treaty Organization (NATO) and the Western European
Union (WEU).

The three Western Allies retained occupation powers in
Berlin and certain responsibilities for Germany as a whole.
Under the new arrangements, the Allies stationed troops
within the F.R.G. for NATO defense, pursuant to stationing
and status-of-forces agreements. With the exception of
45,000 French troops, Allied forces were under NATO's joint
defense command. (France withdrew from the collective
military command structure of NATO in 1966.)

Political life in the F.R.G. was remarkably stable and
orderly. The Adenauer era (1949-63) was followed by a brief
period under Ludwig Erhard (1963-66) who, in turn, was
replaced by Kurt Georg Kiesinger (1966-69). All governments
between 1949 and 1966 were formed by the united caucus of
the Christian Democratic Union (CDU) and Christian Social
Union (CSU), either alone or in coalition with the smaller
Free Democratic Party (FDP). Kiesinger's 1966-69 "Grand
Coalition" included the F.R.G.'s two largest parties,
CDU/CSU and the Social Democratic Party (SPD). In the 1969
election, the SPD--headed by Willy Brandt--gained enough
votes to form a coalition government with the FDP.
Chancellor Brandt remained head of government until May
1974, when he resigned after a senior member of his staff
was uncovered as a spy for the East German intelligence
service.

Finance Minister Helmut Schmidt (SPD) formed a government
and received the unanimous support of coalition members. He
served as Chancellor from 1974 to 1982. Hans-Dietrich
Genscher, a leading FDP official, became Vice Chancellor and
Foreign Minister. Schmidt, a strong supporter of the
European Community (EC) and the Atlantic alliance,
emphasized his commitment to "the political unification of
Europe in partnership with the U.S.A."

In October 1982, the SPD-FDP coalition fell apart when the
FDP joined forces with the CDU/CSU to elect CDU Chairman
Helmut Kohl as Chancellor. Following national elections in
March 1983, Kohl emerged in firm control of both the
government and the CDU. The CDU/CSU fell just short of an
absolute majority, due to the entry into the Bundestag of
the Greens, who received 5.6% of the vote.

In January 1987, the Kohl-Genscher government was returned
to office, but the FDP and the Greens gained at the expense
of the larger parties. Kohl's CDU and its Bavarian sister
party, the CSU, slipped from 48.8% of the vote in 1983 to
44.3%. The SPD fell to 37%; long-time SPD Chairman Brandt
subsequently resigned in April 1987 and was succeeded by
Hans-Jochen Vogel. The FDP's share rose from 7% to 9.1%, its
best showing since 1980. The Greens' share rose to 8.3% from
their 1983 share of 5.6%.

Political Developments in East Germany

In the Soviet zone, the Social Democratic Party was forced
to merge with the Communist Party in 1946 to form a new
party, the Socialist Unity Party (SED). The October 1946
elections resulted in coalition governments in the five Land
(state) parliaments with the SED as the undisputed leader.

A series of people's congresses were called in 1948 and
early 1949 by the SED. Under Soviet direction, a
constitution was drafted on May 30, 1949, and adopted on
October 7, which was celebrated as the day when the German
Democratic Republic was proclaimed. The People's Chamber
(Volkskammer)--the lower house of the G.D.R. Parliament--and
an upper house--the States Chamber (Laenderkammer)--were
created. (The Laenderkammer was abolished in 1958.) On
October 11, 1949, the two houses elected Wilhelm Pieck as
President, and a SED government was set up. The Soviet Union
and its east European allies immediately recognized the
G.D.R., although it remained largely unrecognized by
non-communist countries until 1972-73.

The G.D.R. established the structures of a single-party,
centralized, communist state. On July 23, 1952, the
traditional Laender were abolished and, in their place, 14
Bezirke (districts) were established. Effectively, all
government control was in the hands of the SED, and almost
all important government positions were held by SED members.

The National Front was an umbrella organization nominally
consisting of the SED, four other political parties
controlled and directed by the SED, and the four principal
mass organizations (youth, trade unions, women, and
culture). However, control was clearly and solely in the
hands of the SED. Balloting in G.D.R. elections was not
secret. As in other Soviet bloc countries, electoral
participation was consistently high, with nearly unanimous
candidate approval.

Inter-German Relations

The constant stream of east Germans fleeing to West Germany
placed great strains on F.R.G.-G.D.R. relations in the
1950s. On August 13, 1961, the G.D.R. began building a wall
through the center of Berlin to divide the city and slow the
flood of refugees to a trickle. The Berlin Wall became the
symbol of the east's political debility and the division of
Europe.

In 1969, Chancellor Brandt announced that the F.R.G. would
remain firmly rooted in the Atlantic alliance but would
intensify efforts to improve relations with eastern Europe
and the G.D.R. The F.R.G. commenced this Ostpolitik by
negotiating nonaggression treaties with the Soviet Union,
Poland, Czechoslovakia, Bulgaria, and Hungary.

The F.R.G.'s relations with the G.D.R. posed particularly
difficult questions. Though anxious to relieve serious
hardships for divided families and to reduce friction, the
F.R.G. under Brandt was intent on holding to its concept of
"two German states in one German nation." Relations
improved, however, and in September 1973, the F.R.G. and the
G.D.R. were admitted to the UN. The two Germanys exchanged
permanent representatives in 1974, and, in 1987, G.D.R. head
of state Erich Honecker paid an official visit to the F.R.G.

German Unification

During the summer of 1989, rapid changes took place in the
G.D.R., which ultimately led to German unification. Growing
numbers of east Germans emigrated to the F.R.G. via Hungary
after the Hungarians decided not to use force to stop them.
Thousands of east Germans also tried to reach the west by
staging sit-ins at F.R.G. diplomatic facilities in other
east European capitals. The exodus generated demands within
the G.D.R. for political change, and mass demonstrations in
several cities--particularly in Leipzig--continued to grow.
On October 7, Soviet leader Mikhail Gorbachev visited Berlin
to celebrate the 40th anniversary of the establishment of
the G.D.R. and urged the east German leadership to pursue
reform.

On October 18, Erich Honecker resigned as head of the SED
and as head of state and was replaced by Egon Krenz. But the
exodus continued unabated and pressure for political reform
mounted. On November 4, a demonstration in East Berlin drew
as many as 1 million east Germans. Finally, on November 9,
the Berlin Wall was opened, and east Germans were allowed to
travel freely. Thousands poured through the wall into the
western sectors of Berlin, and on November 12, the G.D.R.
began dismantling it.

On November 28, F.R.G. Chancellor Kohl outlined a 10-point
plan for the peaceful unification of the two Germanys based
on free elections in the G.D.R. and a unification of their
two economies. In December, the G.D.R. Volkskammer
eliminated the SED monopoly on power, and the entire
Politburo and Central Committee, including Krenz, resigned.
The SED changed its name to the Party of Democratic
Socialism (PDS), and the formation and growth of numerous
political groups and parties marked the end of the communist
system. Prime Minister Hans Modrow headed a caretaker
government that shared power with the new, democratically
oriented parties. On December 7, 1989, agreement was reached
to hold free elections in May 1990 and rewrite the G.D.R.
constitution. On January 28, all the parties agreed to
advance the elections to March 18, primarily because of an
erosion of state authority and because the east German
exodus was continuing apace; more than 117,000 left in
January and February 1990.

In early February 1990, the Modrow government's proposal for
a unified, neutral German state was rejected by Chancellor
Kohl, who affirmed that a unified Germany must be a member
of NATO. Finally, on March 18, the first free elections were
held in the G.D.R., and a government led by Lothar de
Maiziere (CDU) was formed under a policy of expeditious
unification with the F.R.G. The freely elected
representatives of the Volkskammer held their first session
on April 5, and the G.D.R. peacefully evolved from a
communist to a democratically elected government. Free and
secret communal (local) elections were held in the G.D.R. on
May 6, and the CDU again won. On July 1, the two Germanys
entered into an economic and monetary union.

Four Power Control Ends

During 1990, in parallel with internal German developments,
the Four Powers--the United States, U.K., France, and the
Soviet Union--together with the two German states negotiated
to end Four Power reserved rights for Berlin and Germany as
a whole. These "Two-plus-Four" negotiations were mandated at
the Ottawa Open Skies conference on February 13, 1990. The
six foreign ministers met four times in the ensuing months
in Bonn (May 5), Berlin (June 22), Paris (July 17), and
Moscow (September 12). The Polish Foreign Minister
participated in the part of the Paris meeting that dealt
with the Polish-German borders.

Of key importance was overcoming Soviet objections to a
united Germany's membership in NATO. This was accomplished
in July when the alliance, led by President Bush, issued the
London Declaration on a transformed NATO. On July 16,
President Gorbachev and Chancellor Kohl announced agreement
in principle on a united Germany in NATO. This cleared the
way for the signing of the Treaty on the Final Settlement
With Respect to Germany in Moscow on September 12. In
addition to terminating Four Power rights, the treaty
mandated the withdrawal of all Soviet forces from Germany by
the end of 1994, made clear that the current borders were
final and definitive, and specified the right of a united
Germany to belong to NATO. It also provided for the
continued presence of British, French, and American troops
in Berlin during the interim period of the Soviet
withdrawal. In the treaty, the Germans renounced nuclear,
biological, and chemical weapons and stated their intention
to reduce German armed forces to 370,000 within 3 to 4 years
after the Conventional Armed Forces in Europe (CFE) Treaty,
signed in Paris on November 19, 1990, entered into force.

Conclusion of the final settlement cleared the way for
unification of the F.R.G. and G.D.R. Formal political union
occurred on October 3, 1990, with the accession (in
accordance with Article 23 of the F.R.G.'s Basic Law) of the
five Laender which had been reestablished in the G.D.R. On
December 2, 1990, all-German elections were held for the
first time since 1933.

GOVERNMENT AND POLITICAL CONDITIONS

The government is parliamentary and based on a democratic
constitution that emphasizes the protection of individual
liberty and division of powers in a federal structure. The
chancellor (prime minister) heads the executive branch of
the federal government. The duties of the president (chief
of state) are largely ceremonial; power is exercised by the
chancellor.  Elected by and responsible to the Bundestag
(lower and principal chamber of the parliament), the
chancellor cannot be removed from office during a 4-year
term unless the Bundestag has agreed on a successor.  The
President is elected every 5 years on May 23 by the Federal
Assembly, a body convoked only for this purpose, comprising
the entire Bundestag (federal legislative lower house) and
an equal number of state delegates.  In the 1999 election,
Johannes Rau of the Social Democratic Party was elected.

The Bundestag, also elected for a 4-year term, consists of
at least twice the number of electoral districts in the
country. (More deputies may be admitted when parties'
directly elected seats exceed their proportional
representation.) Elections for an all-German Bundestag were
first held on December 2, 1990, and again on October 16,
1994 and September 27, 1998. 669 deputies were seated after
the 1998 national elections. The Bundesrat (upper chamber or
Federal Council) consists of 69 members who are delegates of
the 16 Laender (states). The legislature has powers of
exclusive jurisdiction and concurrent jurisdiction with the
Laender in areas specifically enumerated by the Basic Law.
The Bundestag bears the major responsibility. The necessity
for the Bundesrat to concur on legislation is limited to
bills treating revenue shared by federal and state
governments and those imposing responsibilities on the
states.

Germany has an independent federal judiciary consisting of a
constitutional court, a high court of justice, and courts
with jurisdiction in administrative, financial, labor, and
social matters. The highest court is the Federal
Constitutional Court, which ensures a uniform interpretation
of constitutional provisions and protects the fundamental
rights of the individual citizen as defined in the Basic
Law.

Political Parties

Social Democratic Party (SPD).  The SPD, one of the oldest
organized political parties in the world, emerged as the
winner in the September 1998 elections with 40.9% of the
votes cast.  Historically, it advocated Marxist principles,
but in the Godesberg Program, adopted in 1959, the SPD
abandoned the concept of a class party while continuing to
stress social welfare programs. Although the SPD originally
opposed West Germany's 1955 entry into NATO, it now strongly
supports German ties with the alliance. Gerhard Schroeder
led the party to victory in 1998 on a moderate platform
emphasizing the need to reduce unemployment.  The SPD has a
powerful base in the bigger cities and industrialized
Laender.  Oskar Lafontaine, SPD chairman since November
1995, resigned from his party and government positions in
March, 1999.  Schroeder succeeded Lafontaine as party
chairman.

Christian Democratic Union/Christian Social Union (CDU/CSU).
An important aspect of postwar German politics was the
emergence of a moderate Christian party--the Christian
Democratic Union--operating with a related Bavarian party,
the Christian Social Union. Although each party maintains
its own structure, the two form a common caucus in the
Bundestag and do not run opposing campaigns. The CDU/CSU has
adherents among Catholics, Protestants, rural interests, and
members of all economic classes. It is generally
conservative on economic and social policy and more
identified with the Roman Catholic and Protestant churches
than are the other major parties, although its programs are
pragmatic rather than ideological. Helmut Kohl served as
chairman of the CDU from 1973 until the party's electoral
defeat in 1998 when he was succeeded by Wolfgang Schaeuble;
Early in 1999, as a result of a CDU financial scandal,
Schaeuble stepped down. During this time Edmund Stoiber took
over the CSU chairmanship. Angela Merkel, succeeding
Schaeuble, currently serves as the CDU chairperson.  In the
1998 general election, the CDU polled 28.4% and the CSU 6.7%
of the national vote.

Alliance 90/Greens. In the late 1970s, environmentalists
organized politically as the Greens. Opposition to expanded
use of nuclear power, to NATO strategy, and to certain
aspects of highly industrialized society were principal
campaign issues. The Greens received 8.3% of the vote in the
January 1987 west German national election. However, in the
December 1990 all-German elections, the Greens in western
Germany were not able to clear the 5% hurdle required to win
seats in the Bundestag. It was only in the territory of the
former G.D.R. that the Greens, in a merger with Alliance 90
(a loose grouping civil rights activists with diverse
political views), were able to clear the 5% hurdle and win
Bundestag seats. In 1994, Greens from east and west returned
to the Bundestag with 7.3% and 49 seats in 1998; despite a
slight fall in percentage of the vote (6.7%), the Greens
retained 47 seats and joined of the federal government for
the first time in coalition with the SPD. Joschka Fischer
became vice chancellor and foreign minister in the new
government, which has two other Greens ministers.

Free Democratic Party (FDP). The FDP has traditionally been
composed mainly of middle and upper-class Protestants, who
consider themselves "independents" and heirs to the European
liberal tradition. Although the party is weak on the state
level, it has participated in all but three postwar federal
governments and has spent only 8 years out of government in
the 50-year history of the Federal Republic. The party took
6.2% of the vote and returned 43 deputies to the Bundestag
in 1998. Wolfgang Gerhardt has been party chairman since
1995.

Party of Democratic Socialism (PDS). Under chairman Lothar
Bisky and Bundestag caucus leader Gregor Gysi, the PDS is
the successor party to the SED (the communist party of the
G.D.R.). Established in December 1989, it renounced most of
the extreme aspects of SED policy but has retained much of
the ideology. In the December 1990 all-German elections, the
PDS gained 10% of the vote in the former G.D.R. and 17 seats
in the Bundestag. In October 1994, the PDS won four directly
elected seats, to reenter parliament with a total caucus of
30 seats despite staying below the 5% hurdle for
proportional representation. In 1998, the party improved its
result slightly to 5.1% of the national vote and 36
deputies.

Other parties. In addition to those parties that won
representation in the Bundestag in 1998, a variety of minor
parties won a cumulative total of 5.9% of the vote, up from
3.5% in 1994.  Sixteen other parties were on the ballot in
one or more states but not qualified for representation in
the Bundestag. The right-wing parties remained fragmented
and ineffectual at the national level.

Recent Election Issues

The SPD in the 1998 election emphasized commitment to
reducing persistently high unemployment and appealed to
voters' desire for new faces after 16 years of Kohl
government. Schroeder positioned himself as a centrist
"Third Way" candidate in the mold of Britain's Tony Blair.
The CDU/CSU stood on its record of economic performance and
experience in foreign policy. The Kohl government was hurt
at the polls by slower growth in the east in the past 2
years, widening the economic gap between east and west. The
final margin of victory was sufficiently high to permit a
"red-green" coalition of the SPD with the Greens, bringing
the Greens into a national government for the first time.

Principal Government Officials

President--Johannes Rau
President of the Bundestag--Wolfgang Thierse (SPD)
Chancellor--Gerhard Schroeder (SPD)
Vice Chancellor and Minister of Foreign Affairs--Joschka
Fischer (Greens)
Minister of Defense--Rudolf Scharping (SPD)
Minister of Finance--Hans Eichel (SPD)
Ambassador to the U.S.--Juergen Chrobog
Ambassador to the UN--Dr. Dieter Kastrup

Germany maintains an embassy in the United States at 4645
Reservoir Road NW, Washington, DC 20007 (tel. 202-298-4000).

Consulates general are located in Atlanta, Boston, Chicago,
Detroit, Houston, Los Angeles, Miami, New York, San
Francisco, and Seattle. Germany has honorary consuls in over
30 U.S. cities.

ECONOMY

Germany ranks among the world's most important economic
powers, witnessed by its presence among the G7. From the
1948 currency reform until the early 1970s, west Germany
experienced almost continuous economic expansion, but real
growth in gross national product slowed and even declined
from the mid-1970s through the recession of the early 1980s.
The economy then experienced 8 consecutive years of growth
that ended with a downturn beginning in late 1992.

After national unification, eastern German industrial output
collapsed to about 40% of its 1989 level, leading to high
unemployment in the new states. Reunification strained
German public finance, hurt the labor market, and eventually
exposed structural weaknesses in the economy. Following a
reunification-induced western German economic boom during
1990-92 fueled by explosive consumer demand and capital
spending, growth stalled while transfer payments to the
eastern states rose to $90 billion per year. In an effort to
contain the inflationary pressures of these transfers, the
Central Bank (Bundesbank) maintained a high (short-term)
interest rate policy that further dampened economic
activity. In 1994, the German economy began to recover, and
the 10% growth rate in the eastern states was the highest of
any region in Europe. Although eastern Germany maintained
growth of more than 5%, 1995 growth was unexpectedly low at
1.9%.  GDP growth was an even lower in 1996--1.4%--due
mainly to a drop in construction investment and lower
private consumption. Growth strengthened in 1997, continued
through 1998, and is forecasted at 2.5 % for 2000.

Germans often describe their economic system as a "social
market economy." The German Government provides an extensive
array of social services. Although the state intervenes in
the economy through the provision of subsidies to selected
sectors and the ownership of some segments of the economy,
competition and free enterprise are promoted as a matter of
government policy. The government has restructured the
railroad system on a corporate basis and is privatizing the
national airline, energy sectors (gas and electric), and
postal service. Germany also has privatized its
telecommunication giant Deutsche Telekom. Changes to the
German "social compact" have met with strong resistance from
labor and management alike, leaving the labor market highly
regulated and inflexible.

The German economy is heavily export oriented, with
one-third of national output going to the external sector.
As a result, exports traditionally have been a key element
in German acroeconomic expansion. Germany is a strong
advocate of closer European economic integration, and its
economic and commercial policies are increasingly determined
by agreements among European Union (EU) members.

Outside the EU, the United States and Japan are Germany's
major trading partners.  U.S.- German trade has continued to
grow strongly.  Two-way U.S.-German trade is more than $80
billion. The United States continued to run trade deficits
with Germany; U.S. exports in 1998 were $37.6 billion, while
German exports expanded to $49.9 billion. Major U.S. export
categories include aircraft, electrical equipment,
telecommunications equipment, data processing equipment, and
motor vehicles and parts. German export sales are
concentrated in motor vehicles, machinery, chemicals, and
heavy electrical equipment. In services, the United States
consistently shows a surplus in trade with Germany.

Germany follows a liberal policy toward foreign investment.
About 65% of U.S. capital invested in Germany is in
manufacturing. In 1997, total U.S. direct investment in
Germany was $44 billion, making the U.S. Germany's leading
source of foreign investment.  Total German investment in
the United States in 1998 was $95 billion.

Eleven years after the unification of the two German states,
great strides have been made, and the complex task of
introducing a market economy in the east is well-advanced.
Overall productivity in the former G.D.R., which was less
than half that in the F.R.G., is now increasing, narrowing
the gap in productivity rates.  The challenge is to close
the productivity gap altogether.  The poor condition of the
basic infrastructure, widespread environmental damage, and
lower-than-expected levels of private investment in the east
have complicated the process of economic integration.
Private investment in eastern Germany has been slower than
expected in large part because the issue of property
ownership in the former G.D.R. has proven difficult to
resolve.  Public net transfers from west to east from
1991-97 are estimated at $488 billion, or an annual average
of over 4% of the GDP of the former west Germany.  After
several years of exceptionally rapid growth, growth in the
east lagged the national rate in 1997 and 1998.
Unemployment in the east has remained high: in February 1999
it was 19.1% in east Germany compared to 10.4% in west
Germany.

Germany's greatest economic problem is its persistently high
unemployment rate.  Solid growth in 1998 brought the
national, nonseasonally adjusted unemployment rate down only
to 11.1% in March 1999 from 12.1% a year earlier.  Although
the new government elected in September 1998 made employment
creation its central theme, there is no national consensus
on how to achieve this.  Some of the modest reforms designed
to loosen structural rigidities introduced near the end of
the Kohl government have been reversed since the election.

Despite persistence of structural rigidities in the labor
market and extensive government regulation, the economy
remains strong and internationally competitive. Although
production costs are very high, Germany is still an export
powerhouse.  Germany competes successfully in highly
engineered, quality products backed by excellent service.
German firms are somewhat less successful in high-tech
electronic goods.  In 1998, Germany ran a trade surplus of
$73 billion and a current account deficit of about $9
billion.  Imports and exports were both down in the last
months of 1998 and in January 1999, in part reflecting
continued problems in emerging country markets.  Abundant
personnel, low corporate debt burdens, and cooperative
industrial relations continue to characterize the German
economy.  Additionally, Germany is strategically placed to
take advantage of the rapidly growing central European
countries. Although the Germans face fundamental economic
adjustments, they have the discipline and the resources to
meet the challenges ahead.

FOREIGN RELATIONS

Germany continues to emphasize close ties with the United
States, membership in NATO, the "deepening" of integration
among current members of the EU, and expansion of union
membership to include central andsouthern European
neighbors.  The F.R.G. took part in all of the joint postwar
efforts aimed at closer political, economic, and defense
cooperation among the countries of Western Europe.  Germany
has been a large net contributor to the EU budget; the
Schroeder government is seeking to limit the growth of these
net payments before the next round of enlargement.  Germany
also is a strong supporter of the United Nations and of the
Organization for Security and Cooperation in Europe (OSCE),
which seeks to reduce tensions and improve relations among
the European nations, the U.S., and Canada.

During the postwar era, the F.R.G. also sought to improve
its relationship with the countries of eastern Europe, first
establishing trade agreements and, subsequently, diplomatic
relations. With unification, German relations with the new
democracies in central and eastern Europe intensified. On
November 14, 1990, Germany and Poland signed a treaty
confirming the Oder-Neisse border. They also concluded a
cooperation treaty on June 17,1991. Germany concluded four
treaties with the Soviet Union covering the overall
bilateral relationship, economic relations, the withdrawal
of Soviet troops from the territory of the former G.D.R.,
and German support for those troops.  Russia accepted
obligations under these treaties as successor to the Soviet
Union. Germany continues to be active economically in the
states of central and eastern Europe, and to actively
support the development of democratic institutions.

Berlin

Shortly after World War II, Berlin became the seat of the
Allied Control Council, which was to have governed Germany
as a whole until the conclusion of a peace settlement. In
1948, however, the Soviets refused to participate any longer
in the quadripartite administration of Germany. They also
refused to continue the joint administration of Berlin and
drove the government elected by the people of Berlin out of
its seat in the Soviet sector and installed a communist
regime in its place. From then until unification, the
Western Allies continued to exercise supreme
authority--effective only in their sectors--through the
Allied Kommandatura. To the degree compatible with the
city's special status, however, they turned over control and
management of city affairs to the Berlin Senate (executive)
and House of Representatives, governing bodies established
by constitutional process and chosen by free elections. The
Allies and German authorities in the F.R.G. and West Berlin
never recognized the communist city regime in East Berlin or
G.D.R. authority there.

During the years of Berlin's isolation--176 kilometers (110
mi.) inside the former G.D.R.--the Western Allies encouraged
a close relationship between the Government of  West Berlin
and that of the F.R.G. representatives of the city
participated as nonvoting members in the F.R.G. Parliament;
appropriate West German agencies, such as the supreme
administrative court, had their permanent seats in the city;
and the governing mayor of Berlin took his turn as President
of the Bundesrat. In addition, the allies carefully
consulted with the F.R.G. and Berlin Governments on foreign
policy questions involving unification and the status of
Berlin.

Between 1948 and 1990, major events such as fairs and
festivals were sponsored in West Berlin, and investment in
commerce and industry was encouraged by special
concessionary tax legislation. The results of such efforts,
combined with effective city administration and the
Berliners' energy and spirit, were encouraging. Berlin's
morale was sustained, and its industrial production
considerably surpassed the prewar level.

The Final Settlement Treaty ended Berlin's special status as
a separate area under Four Power control. Under the terms of
the treaty between the F.R.G. and the G.D.R., Berlin became
the capital of a unified Germany. The Bundestag voted in
June 1991 to make Berlin the seat of government. The
Government of Germany asked the allies to maintain a
military presence in Berlin until the complete withdrawal of
the Western Group of Forces (ex-Soviet) from the territory
of the former G.D.R. The Russian withdrawal was completed
August 31, 1994. Ceremonies were held on September 8, 1994,
to mark the final departure of Western Allied troops from
Berlin.

In 1999, Berlin became the formal seat of the German federal
government.

U.S.-GERMAN RELATIONS

U.S.-German relations have been a focal point of American
involvement in Europe since the end of World War II. Germany
stands at the center of European affairs and is a key
partner in U.S. relations with Europeans in NATO and the
European Union.

But German-American ties extend back to the colonial era.
More than 7 million Germans have immigrated over the last
three centuries, and today nearly 25% of U.S. citizens can
claim some German ancestry.  In recognition of this heritage
and the importance of modern-day U.S.- German ties, the U.S.
Congress annually has declared October 6 to be
"German-American Day."

The U.S. objective in Germany remains the preservation and
consolidation of a close and vital relationship with Germany
not only as friends and trading partners but also as allies
sharing common institutions.  During the 45 years in which
Germany was divided, the U.S. role in Berlin and the large
American military presence in West Germany served as symbols
of the U.S. commitment to the preservation of peace and
security in Europe.  Since German unification, the U.S.
commitment to these goals has not changed.  The U.S. made
significant reductions in its troop levels in Germany after
the Cold War ended, and, on July 12, 1994, President Clinton
"cased the colors" at the Berlin Brigade's deactivation
ceremony.  American policies, however, continue to be shaped
by the awareness that the security and prosperity of the
United States and Germany depend--to a major extent--on each
other.  Over 80,000 U.S. military personnel remain in
Germany to protect these common interests.

As allies in NATO, the United States and Germany work side
by side to maintain peace and freedom. This unity and
resolve made possible the successful conclusion of the 1987
U.S.-U.S.S.R. Intermediate-Range Nuclear Forces Treaty
(INF), the Two-plus-Four process, which led to the Final
Settlement Treaty, and the November 1990 Conventional Armed
Forces in Europe (CFE) Treaty.  More recently, the two
allies have cooperated closely in peacekeeping efforts in
the Balkans and have worked together to encourage the
evolution of open and democratic states throughout central
and eastern Europe.

As two of the world's leading trading nations, the United
States and Germany share a common, deep-seated commitment to
an open and expanding world economy. Germany is the world's
second-leading trading nation. It is the fifth-largest
trading partner of the United States.

Personal ties between the United States and Germany extend
beyond immigration to include lively foreign exchange
programs, booming tourism in both directions, and the
presence in Germany of large numbers of American military
personnel and their dependents. In the commercial sphere,
more than 600,000 Germans work for U.S. companies in Germany
while Americans employed by German firms here number over
500,000.

The United States and Germany have built a solid foundation
of bilateral cooperation in a relationship that has changed
significantly over five decades. The historic unification of
Germany and the role played by the United States in that
process have served to strengthen ties between the two
countries. The relationship is now a mature partnership but
remains subject to occasional misunderstandings and
differences. These strains tend to reflect the importance,
variety, and intensity of U.S.-German ties and respective
interests rather than fundamental differences.

German-American political, economic, and security
relationships continue to be based on close consultation and
coordination at the most senior levels. High-level visits
take place frequently, and the United States and Germany
cooperate actively in international forums.

Principal U.S. Embassy Officials

Ambassador--John C. Kornblum
Deputy Chief of Mission--Michael C. Polt
Minister-Counselor for Political Affairs-David Wolfstone
Minister-Counselor for Economic Affairs--Joseph A. Saloom
Minister-Counselor for Commercial Affairs--Kay Kuhlman
Minister-Counselor for Administrative Affairs--Lynwood Dent
Minister-Counselor for Consular Affairs--Brian M. Flora
Minister-Counselor for Public Affairs--David Arnett
Minister-Counselor for Agricultural Affairs-Peter O. Kurz
Chief, Office of Defense Cooperation--Col. Robert L. Moore
Defense Attache--Col. Eric Hammersen

The U.S. Embassy, in Berlin, is located at Neustaedtische
Kirchstrasse 4-5, 10117 Berlin, Tel: (030) 238-5174.
Consulates general are in Frankfurt, Hamburg, Munich,
Leipzig, and Dusseldorf.  Mission Germany maintains an
informative web site at: http://www.usembassy.de.

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program
provides Travel Warnings and Consular Information Sheets.
Travel Warnings are issued when the State Department
recommends that Americans avoid travel to a certain country.
Consular Information Sheets exist for all countries and
include information on immigration practices, currency
regulations, health conditions, areas of instability, crime
and security, political disturbances, and the addresses of
the U.S. posts in the country. Public Announcements are
issued as a means to disseminate information quickly about
terrorist threats and other relatively short-term conditions
overseas that pose significant risks to the security of
American travelers. Free copies of this information are
available by calling the Bureau of Consular Affairs at
202-647-5225 or via the fax-on-demand system: 202-647-3000.
Travel Warnings and Consular Information Sheets also are
available on the Consular Affairs Internet home page:
http://travel.state.gov and the Consular Affairs Bulletin
Board (CABB). To access CABB, dial the modem number:
(301-946-4400 (it will accommodate up to 33,600 bps), set
terminal communications program to N-8-1 (no parity, 8 bits,
1 stop bit); and terminal emulation to VT100. The login is
travel and the password is info (Note: Lower case is
required). The CABB also carries international security
information from the Overseas Security Advisory Council and
Department's Bureau of Diplomatic Security. Consular Affairs
Trips for Travelers publication series, which contain
information on obtaining passports and planning a safe trip
abroad, can be purchased from the Superintendent of
Documents, U.S. Government Printing Office, P.O. Box 371954,
Pittsburgh, PA 15250-7954; telephone: 202-512-1800; fax
202-512-2250.

Emergency information concerning Americans traveling abroad
may be obtained from the Office of Overseas Citizens
Services at (202) 647-5225. For after-hours emergencies,
Sundays and holidays, call 202-647-4000.

Passport Services information can be obtained by calling the
24-hour, 7-day a week automated system ($.35 per minute) or
live operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05
per minute). The number is 1-900-225-5674 (TDD:
1-900-225-7778). Major credit card users (for a flat rate of
$4.95) may call 1-888-362-8668 (TDD: 1-888-498-3648)

Travelers can check the latest health information with the
U.S. Centers for Disease Control and Prevention in Atlanta,
Georgia. A hotline at (404) 332-4559 gives the most recent
health advisories, immunization recommendations or
requirements, and advice on food and drinking water safety
for regions and countries. A booklet entitled Health
Information for International Travel (HHS publication number
CDC-95-8280) is available from the U.S. Government Printing
Office, Washington, DC 20402, tel. (202) 512-1800.

Information on travel conditions, visa requirements,
currency and customs regulations, legal holidays, and other
items of interest to travelers also may be obtained before
your departure from a country's embassy and/or consulates in
the U.S. (for this country, see "Principal Government
Officials" listing in this publication).

U.S. citizens who are long-term visitors or traveling in
dangerous areas, are encouraged to register at the U.S.
embassy upon arrival in a country (see "Principal U.S.
Embassy Officials" listing in this publication). This may
help family members contact you in case of an emergency.

Further Electronic Information

Department of State Foreign Affairs Network. Available on
the Internet, DOSFAN provides timely, global access to
official U.S. foreign policy information. Updated daily,
DOSFAN includes Background Notes; Dispatch, the official
magazine of U.S. foreign policy; daily press briefings;
directories of key officers of foreign service posts; etc.
DOSFAN's World Wide Web site is at U.S. State Department
Home Page (http://www.state.gov); this site has a link to
the DOSFAN Gopher Research Collection, which also is
accessible at gopher://gopher.state.gov.

U.S. Foreign Affairs on CD-ROM (USFAC). Published on a
semi-annual basis by the U.S. Department of State, USFAC
archives information on the Department of State Foreign
Affairs Network, and includes an array of official foreign
policy information from 1990 to the present. Contact the
Superintendent of Documents, U.S. Government Printing
Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. To
order, call (202) 512-1800 or fax (202) 512-2250.

National Trade Data Bank (NTDB). Operated by the U.S.
Department of Commerce, the NTDB contains a wealth of
trade-related information, including Country Commercial
Guides. It is available on the Internet (www.stat-sa.gov)
and on CD-ROM. Call the NTDB Help-Line at (202) 482-1986 for
more information.

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