Similarities And Differences Of Germany And Spain's Economy

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Germany is recognized as the largest and strongest economy in Europe through its abundance in exports and skilled labor force. Germany’s banking system has contributed to its continuous economic growth. The nation overcame a series of economic crises including post-war reparations, the German reunification in 1990, and the mortgage and banking crash in 2007. Despite these difficulties, the country manages to remain affluent with the support of its financial institutions. The banking sector in Germany is characterized by a three-pillar system which is composed of private commercial banks, public savings banks, and cooperative banks. The most influential aspect of the nation’s prosperity is the central bank of Germany, the Bundesbank, which …show more content…
My group and I chose to compare Germany and Spain because both countries have maintained strong economic growth and are among the leading economies in Europe. Also, it is interesting to discover how the differences in their social and political institutions affect the nation’s economy. Germany’s financial system strongly advocates the independence of central banks apart from the government as it is a democratic, federal parliamentary republic. On the other hand, the form of government in Spain is a parliamentary monarchy, influencing the members elected to preside over the country’s monetary policy measures. Nonetheless, both countries are within the Eurozone, meaning their currency is the euro. The exchange rate of the euro relative to the U.S. Dollar is 1 euro equaling 1.13 US Dollars. The central banking systems in Germany and Spain are similar in nature, in the sense that they are both equivalents of the Federal Reserve in the United States. The central bank of Spain, Banco de España, was established in 1782 and is located in the country’s capital, Madrid. Similar to Germany, its main function is to maintain price stability throughout the Eurozone. Both institutions also perform the standard tasks of a bank by enacting monetary policy through regulation of money circulation. Banking systems in both Germany and Spain are governed by the European Central Bank. The EBC is the financial institution which implements monetary policy for countries whose currency is the euro. However, Germany achieves more control over its monetary policy because the Bundesbank was essentially the model for the creation of the European Central Bank. As a result, Germany remains the largest influence and its president receives one vote in regards to policies implemented by the EBC. Throughout Europe, several

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