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Investment

Germany is on top - but for how long?

Germany remains one of the most sought after places on the planet to do business. But how much longer can it enjoy this revered status, asks DW’s Henrik Böhme.

Of course it sounds great at first: Germany is near the top of the list of where investors around the world want to park their money. And why not? It boasts a pro-business climate, an intact transport infrastructure (at first glance anyway), a well-trained workforce and a highly developed legal system.

Taken together, these are the reasons why a global survey from Ernst & Young places Germany in the fourth spot of a ranking of most attractive places around the globe to invest money. That's a jump of two places up the list.

And if you consider that the survey of 800 managers around the world was taken before the crisis erupted between Ukraine and Russia, which placed third in the ranking, Germany might actually be among the top three nations in terms of attractiveness to investors.

China and the United States lead the list and they are likely to stay there. But EY said that Germany has registered the strongest gains in attractiveness. The authors of the study confirmed that Germany's economy is clearly the most robust and competitive in Europe.

There's more good news: Germany's KfW development bank is now forecasting 2 percent GDP growth for Germany this year. This has all the hallmarks of a sustainable recovery. The growth is no longer mostly coming from exports, but also from rapidly growing domestic demand. Consumers are earning more, so they are spending more. And companies are increasingly investing in new production capacity.

So excuse me if I slam on the brakes to all this euphoria. As they say, pride comes before a fall. The EY survey suggests there may be some truth to this, given that more and more German companies want to outsource some of their production to workforces beyond the border. At the same time, fewer foreign companies want to transfer additional business functions to Germany or create more production capacity.

There are various reasons for this. First, Germany is fully integrated into the global economy, like all other industrialized countries. This creates a dynamic process, because corporations are constantly on the search for the best conditions for efficient production. The other point is that the managers in the EY survey apparently see Germany's drive toward reforms as slowing down. They are concerned about billions of euros worth of politically motivated “gifts,” such as lowering Germany's pension age to 63.

This reminds me all too well of the situation in Germany at the beginning of the 1990s. The euphoria of reunification and the one-time economic benefits that came with it were over. Germany became the sick man of Europe. A rocky road, with deep cuts in the social security system, finally brought about a recovery. If the grand coalition in Berlin continues on its present course, there is a risk that Germany's place in the sun could be lost.

A top ranking in the EY survey could become a thing of the past.

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