Germany is Europe’s and the European Union’s largest single economy. It is also the world’s second largest export nation and fourth largest economy, due to these factors Germany accounts for a significant segment of the global economy. Germany is also responsible for a significant amount of the E.U budget and by extension the budgets of individual member states. This gives Germany enormous economic clout both within the E.U and the world at large. Within the E.U, German trading policy affects fiscal policies of member states by encouraging lower government debts and higher efficiency.
German trading policies have both detrimental and beneficial consequences, one of which is:
- Budgeting: this is both a detrimental and beneficial scenario, depending on the situation. In good economic times, German subsidies allow government to supplement national budgets and increase spending. However Germany’s conservative fiscal policies also encourage spending cutbacks in times of economic contracting.