Government OverviewGermany is a federal republic founded in and the legal system is the civil law system. It consists of a Central Federal Government and 16 federal states. Each state has its own constitution, legislature, and government, which can pass laws on all matters except defense, foreign affairs, and finance which are the exclusive right of the federal government. Government spending refers to public expenditure on goods and services and is a major component of a country’s GDP. Government spending policies such as adjusting taxation, increasing public expenditure and public works are very effective tools in influencing economic growth. As of 2015, Government expenditures are equivalent to 44.7 percent of the gross domestic product.
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Government StructureAs previously stated, the governmental system in Germany is a parliamentary democracy in which all power originates from the people and where the powers of administration, legislature, and judiciary are mutually checked and balanced. Germany is a social market economy and known as “sozial Marktwirtschaft” in German. The Basic Law guarantees employers and trade unions independence in negotiating wages, and they accordingly have the right themselves to select the working conditions. The state provides subsidies and controls few segments of the economy, with “free enterprise” and the “rule of the market” promoted as a part of governmental policy. Although the state provided subsidies and controls few segments of the economy, “free enterprise” and the “rule of the market” was also promoted as a part of governmental policy. Overall, Germany’s government structure is similar to that of a free market economy because the social market economy combines free market capitalism alongside the social policies.
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