As Europe’s largest economy, Germany is a major destination for foreign direct investment (FDI) and has accumulated a vast stock of FDI over time. Germany is consistently ranked as one of the most attractive investment destinations based on its reliable infrastructure, highly skilled workforce, positive social climate, stable legal environment, and world-class research and development.
The United States is the leading source of non-European foreign investment in Germany. Foreign investment in Germany mainly originates from other European countries, the United States, and Japan. FDI from emerging economies (and China) has grown slowly over 2015-2018, albeit from low levels.
The German government continues to strengthen provisions for national security screening inward investment in reaction to an increasing number of high-risk acquisitions of German companies by foreign investors in recent years, particularly from China. German authorities strongly support the European Union framework to coordinate Member State screening of foreign investments, which entered into force in April 2019, and are currently enacting implementing legislation.
In 2018, the government lowered the threshold for the screening of investments, allowing authorities to screen acquisitions by foreign entities of at least 10 percent of voting rights of German companies that operate or provide services related to critical infrastructure. The amendment also added media companies to the list of sensitive businesses.
Further amendments, still in draft as of May 2020, will
a) introduce a more pro-active screening based on “prospective impairment” of public order or security by an acquisition, rather than a de facto threat,
b) take into account the impact on other EU member states, and
c) formally suspend transactions during the screening process.
Furthermore, acquisitions by foreign government-owned or funded entities will now trigger a review, and the healthcare industry will be considered a sensitive sector to which the stricter 10% threshold applies. The Federal Ministry for Economic Affairs and Energy said it would draft a further amendment later in 2020 which would include a list of sensitive technologies (similar to the current list of critical infrastructure) to include artificial intelligence, robotics, semiconductors, biotechnology, and quantum technology. Foreign investors who seek to acquire at least 10% of ownership rights of a German company in one those fields would be required to notify the government and potentially become subject to an investment review. With these draft and planned amendments, Germany is implementing the 2019 EU Screening Regulation.
German legal, regulatory, and accounting systems can be complex and burdensome but are generally transparent and consistent with developed-market norms. Businesses operate within a well regulated, albeit high cost, environment. Foreign and domestic investors are treated equally when it comes to investment incentives or the establishment and protection of real and intellectual property. Foreign investors can rely on the German legal system to enforce laws and contracts; at the same time, this system requires investors to closely track their legal obligations. New investors should ensure they have the necessary legal expertise, either in-house or outside counsel, to meet all national and EU regulations.
German authorities are committed to fighting money laundering and corruption. The government promotes responsible business conduct and German SMEs are aware of the need for due diligence.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The German government and industry actively encourage foreign investment. U.S. investment continues to account for a significant share of Germany’s FDI. The 1956 U.S.-Federal Republic of Germany Treaty of Friendship, Commerce and Navigation affords U.S. investors national treatment and provides for the free movement of capital between the United States and Germany. As an OECD member, Germany adheres to the OECD National Treatment Instrument and the OECD Codes of Liberalization of Capital Movements and of Invisible Operations. The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis for the Federal Ministry for Economic Affairs and Energy to review acquisitions of domestic companies by foreign buyers, to assess whether these transactions pose a risk to the public order or national security (for example, when the investment pertains to critical infrastructure). For many decades, Germany has experienced significant inbound investment, which is widely recognized as a considerable contributor to Germany’s growth and prosperity. The investment-related challenges facing foreign companies are broadly the same as face domestic firms, e.g high tax rates and labor laws that complicate hiring and dismissals. Germany Trade and Invest (GTAI), the country’s economic development agency, provides extensive information for investors: https://www.gtai.de/gtai-en/invest
Limits on Foreign Control and Right to Private Ownership and Establishment
Under German law, a foreign-owned company registered in the Federal Republic of Germany as a GmbH (limited liability company) or an AG (joint stock company) is treated the same as a German-owned company. There are no special nationality requirements for directors or shareholders.
The provision of employee placement services, such as providing temporary office support, domestic help, or executive search services, requires registration of a business in Germany.
Germany maintains an elaborate mechanism to screen foreign investments based on national security grounds. The legislative basis for the mechanism (the Foreign Trade and Payments Act and Foreign Trade and Payments Ordinance) has been amended several times in recent years in an effort to tighten parameters of the screening as technological threats evolve, particularly to address growing investment interest by malevolent actors in both Mittelstand (mid-sized) and blue chip German companies. Amendments to implement the 2019 EU Screening Regulation are in draft or have been announced as of May 2020. In addition, authorities will make “prospective impairment” of public order and security the new trigger for an investment review, in place of the current standard (which requires a de facto threat).
Other Investment Policy Reviews
The World Bank Group’s “Doing Business 2020” and Economist Intelligence Unit both provide additional information on Germany’s investment climate. The American Chamber of Commerce in Germany also publishes results of an annual survey of U.S. investors in Germany (“AmCham Germany Transatlantic Business Barometer”, https://www.amcham.de/publications).
Before engaging in commercial activities, companies and business operators must register in public directories, the two most significant of which are the commercial register (Handelsregister) and the trade office register (Gewerberegister).
Applications for registration at the commercial register, which is available under www.handelsregister.de, are electronically filed in publicly certified form through a notary. The commercial register provides information about all relevant relationships between merchants and commercial companies, including names of partners and managing directors, capital stock, liability limitations, and insolvency proceedings. Registration costs vary depending on the size of the company.
Micro-enterprises: less than 10 employees and less than €2 million annual turnover or less than €2 million in balance sheet total.
Small-enterprises: less than 50 employees and less than €10 million annual turnover or less than €10 million in balance sheet total.
Medium-sized enterprises: less than 250 employees and less than €50 million annual turnover or less than €43 million in balance sheet total.
Germany’s federal government provides guarantees for investments by Germany-based companies in developing and emerging economies and countries in transition in order to insure them against political risks. In order to receive guarantees, the investment must have adequate legal protection in the host country. The Federal Government does not insure against commercial risks.
Among industrialized countries, Germany ranks 9th out of 180, according to Transparency International’s 2019 Corruption Perceptions Index. Some sectors including the automotive industry, construction sector, and public contracting, exhibit political influence and party finance remains only partially transparent. Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Germany. Germany is a signatory of the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.
Over the last two decades, Germany has increased penalties for the bribery of German officials, corrupt practices between companies, and price-fixing by companies competing for public contracts. It has also strengthened anti-corruption provisions on financial support extended by the official export credit agency and has tightened the rules for public tenders. Government officials are forbidden from accepting gifts linked to their jobs. Most state governments and local authorities have contact points for whistle-blowing and provisions for rotating personnel in areas prone to corruption. There are serious penalties for bribing officials and price fixing by companies competing for public contracts.
According to the Federal Criminal Office, in 2018, 73 percent of all corruption cases were directed towards the public administration (up from 63 percent in 2017), 18 percent towards the business sector (down from 22 percent in 2017), 7 percent towards law enforcement and judicial authorities (down from 12 percent in 2017), and 2 percent to political officials (down from 3 percent in 2017).
Parliamentarians are subject to financial disclosure laws that require them to publish earnings from outside employment. Disclosures are available to the public via the Bundestag website (next to the parliamentarians’ biographies) and in the Official Handbook of the Bundestag. Penalties for noncompliance can range from an administrative fine to as much as half of a parliamentarian’s annual salary.
Donations by private persons or entities to political parties are legally permitted. However, if they exceed €50,000, they must be reported to the President of the Bundestag, who is required to immediately publish the name of the party, the amount of the donation, the name of the donor, the date of the donation, and the date the recipient reported the donation. Donations of €10,000 or more must be included in the party’s annual accountability report to the President of the Bundestag.
State prosecutors are generally responsible for investigating corruption cases, but not all state governments have prosecutors specializing in corruption. Germany has successfully prosecuted hundreds of domestic corruption cases over the years, including large scale cases against major companies.
Media reports in recent years about bribery investigations against Siemens, Daimler, Deutsche Telekom, Deutsche Bank, and Ferrostaal have increased awareness of the problem of corruption. As a result, listed companies and multinationals have expanded compliance departments, tightened internal codes of conduct, and offered more training to employees.
The Federation of Germany Industries (BDI), the Association of German Chamber of Commerce and Industry (DIHK) and the International Chamber of Commerce (ICC) provide guidelines in paper and electronic format on how to prevent corruption in an effort to convince all including small- and medium- sized companies to catch up.
UN Anticorruption Convention, OECD Convention on Combatting Bribery
Germany was a signatory to the UN Anti-Corruption Convention in 2003. The Bundestag ratified the Convention in November 2014.
Germany adheres to and actively enforces the OECD Anti-Bribery Convention which criminalizes bribery of foreign public officials by German citizens and firms. The necessary tax reform legislation ending the tax write-off for bribes in Germany and abroad became law in 1999.
Germany participates in the relevant EU anti-corruption measures and signed two EU conventions against corruption. However, while Germany ratified the Council of Europe Criminal Law Convention on Corruption in 2017, it has not yet ratified the Civil Law Convention on Corruption.
Resources to Report Corruption
There is no central government anti-corruption agency in Germany.
Contact at “watchdog” organization:
Hartmut Bäumer, Chair
Transparency International Germany
Alte Schönhauser Str. 44, 10119 Berlin
+49 30 549 898 0
The Federal Criminal Office publishes an annual report: “Bundeslagebild Korruption” – the latest one covers 2018.
After nearly ten years of austerity measures and reforms under three economic adjustment programs, Greece made significant progress in 2019 in its return to economic normalcy. The New Democracy party won elections in July 2019 on a mandate to continue to reform and streamline the economy as well as attract foreign direct investment. Growth reached an estimated 1.9% in 2019. The government exceeded its 2019 primary surplus target of €4.4 billion, recording a surplus of €4.96 billion. Major challenges remain, however, considering the economic disruption expected from lockdown measures imposed in response to COVID-19. At the end of 2019, Greece’s public debt was €342.9 billion, or more than 176% of GDP. Unemployment decreased slightly in 2019, reaching 16.4% by January 2020. Both of these numbers are expected to rise in the aftermath of COVID-19.
Greece maintains a liquidity buffer, estimated at €26 billion, thanks to the addition of a final €15 billion loan tranche disbursed by the European Stability Mechanism (ESM). So far untouched, the buffer should be sufficient to cover the country’s financing needs until at least the end of 2022, and the country’s leadership maintains its intention to reserve the ESM tranche solely for sovereign debt interest payments. Capital controls were completely lifted in September 2019. Greece remains subject to enhanced supervision by Eurozone creditors, and the government met its goal of a primary budget surplus of 3.5% of GDP in 2019. Greece had committed to meet the annual primary budget surplus target of 3.5% of GDP through 2022 and 2.2% afterwards, although its Eurozone creditors have suspended the surplus requirement this year due to COVID-19.
In previous years, concerns over economic and political stability within Greece essentially froze most new investment and caused some existing investors to scale down or withdraw entirely from the Greek market, but this is no longer the case. Success in the privatization of Greece’s fourteen regional airports, investment in the tourism sector, and the construction of the Trans-Adriatic Pipeline demonstrated the opportunities that have existed in Greece even during the height of the economic crisis. Greek travel and tourism receipts jumped 12.8% in 2019 to a record €18.5 billion with a 4.1% increase in tourist arrivals in 2019. Prices for residential properties rose 7.2%, a huge jump from 1.2% in 2018, and individual FDI in real estate has tripled from €414 million in 2017 to €1.45 billion in 2019. Chinese investors continue to eye Greece for real estate purchases, with inquiries from Chinese buyers increasing by 109% in the first quarter of 2020 as compared to the first quarter of 2019, with much of the interest attributed to Greece’s attractive Golden Visa program.
Greece’s return to economic growth has generated new investor interest in the country. In January 2019, Greece successfully raised €2.5 billion in a five-year bond sale at a yield of 3.6% and €487 million in 13-week treasury bills in October 2019 with a yield of –0.02%, the first time Greece has ever had a negative yield. In January 2020, Greece raised another €2.5 billion in a fifteen-year bond sale at a yield of 1.9%, demonstrating the country’s strong return to the capital markets.
In January 2020, Fitch ratings agency upgraded Greece’s credit rating to BB, although it lowered its outlook from ‘positive’ to ‘stable’ in April 2020 due to the financial impact of COVID-19. Standard & Poor’s raised Greece’s credit rating from BB- to B+ in October 2019, although it also downgraded its outlook to ‘stable’ in April 2020. For the first time, the European Central Bank (ECB) included Greek government bonds in its quantitative easing program, with €12 billion worth of Greek government debt to be purchased under the ECB’s €750 billion Pandemic Emergency Purchase Program in 2020.
Although Greece has seen positive developments in the past few years, investors worry about where Greece will be once COVID-19 subsides. The Greek Government has been given strong marks for its initial response in limiting the spread of the pandemic and has implemented several innovative digital reforms to its economy during COVID-19. The extent of the impact is yet to come, but the Bank of Greece, EU, IMF, and others have predicted a contraction of 4-15% in 2020. The tourism sector in particular, which comprises almost a quarter of the economy, is likely to take a hit with predictions of a 50-70% loss in tourism revenue. Estimates of unemployment hover around 20% or higher. As 2020 continues, the resiliency of the Greek economy will be tested, with uncertain impacts on the investment climate.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Greek government continues to state its desire to increase foreign investment, though the country remains a challenging climate for investment, both foreign and domestic, and will likely remain so in light of the COVID-19 crisis. However, Greece completed its EU bailout program in 2018, allowing it to borrow once again at market rates, reflected in a rising economic sentiment since 2017.
There are no laws or practices known to Post that discriminate against foreign investors.
The General Secretariat for Strategic and Private Investments streamlines the licensing procedure for strategic investments, aiming to make the process easier and more attractive to investors.
Greece has adopted the following EU definitions regarding micro, small, and medium size enterprises:
Micro Enterprises: Fewer than 10 employees and an annual turnover or balance sheet below €2 million.
Small Enterprises: Fewer than 50 employees and an annual turnover or balance sheet below €10 million.
Medium-Sized Enterprises: Fewer than 250 employees and annual turnover below €50 million or balance sheet below €43 million.
Numerous structural reforms, both undertaken as part of the country’s 2015-2018 international bailout program, as well as a part of New Democracy’s efforts to reduce bureaucracy and red tape, aim to welcome and facilitate foreign investment, and the government has publicly messaged its dedication to attracting foreign investment. The Trans Adriatic Pipeline (TAP) is one example of the government’s commitment in this area. In November 2015, the Greek government and TAP investors agreed on measures and began construction on the largest investment project since the start of the financial crisis, with the pipeline set to begin operations in late 2020. Nevertheless, many structural reforms have created greater challenges to investors and established businesses in Greece. The country has undergone one of the most significant fiscal consolidations in modern history, with broad and deep cuts to public expenditures and significant increases in labor and social security tax rates, which have offset improved labor market competitiveness achieved through significant wage devaluation. While there has been notable progress, corruption and burdensome bureaucracy continue to create barriers to market entry for new firms, permitting incumbents to maintain oligopolies in different sectors, and creating scope for arbitrary decisions and rent seeking by public servants.
Limits on Foreign Control and Right to Private Ownership and Establishment
As a member of the EU and the European Monetary Union (the “Eurozone”), Greece is required to meet EU and Eurozone investment regulations. Foreign and domestic private entities have the legal right to establish and own businesses in Greece; however, the country places restrictions on foreign equity ownership higher than those imposed on average in the other 17 high-income OECD economies, such as equity restrictions on airport operations and limits on foreign ownership in electricity and media. The government has undertaken EU-mandated reforms in its energy sector, opening much of it to foreign equity ownership. Restrictions exist on land purchases in border regions and on certain islands because of national security considerations. Foreign investors can buy or sell shares on the Athens Stock Exchange on the same basis as local investors. Greece does not maintain an investment screening mechanism.
Other Investment Policy Reviews
In March 2018, the OECD published an economic survey describing the state of the economy and addressing foreign direct investment concerns. The government has sought the OECD’s counsel and technical assistance to carry out select reforms from the recommendations and develop additional reforms in line with the government’s emphasis on the social welfare state. Greece also underwent an OECD Development Co-operation Peer Review in February 2019, where Greece’s positive support to asylum seekers was noted.
“Enterprise Greece” is the official investment promotion agency of the Greek state. Under the supervision of the Ministry of Foreign Affairs, Enterprise Greece is responsible for promoting investment in Greece and exports from Greece, and with making Greece more attractive as an international business partner. Enterprise Greece provides the full spectrum of services related to international business relationships and domestic business development for the international market, including an Investor Ombudsman program for investment projects exceeding €2 million. The Ombudsman is available to assist with specific bureaucratic obstacles, delays, disputes, or other difficulties that impede an investment project. Enterprise Greece is now housed within the Economic Diplomacy Department of the Ministry of Foreign Affairs.
In 2020, Greece eased processes for starting a business resulting in reduced time to register a company and removing the requirement to obtain a tax clearance. Accessing industrial land in Greece is relatively quick, with only three weeks required to lease land from the government. Private land can be leased in 15 days.
The fast track law, passed in December 2010, aimed to simplify the licensing and approval process for “strategic” investments, i.e. large-scale investments that will have a significant impact on the national economy. In 2013, Greece’s parliament passed Investment Law 4146/2013 to simplify the regulatory system and stimulate investment. This law provides additional incentives, beyond those in the fast track law, available to domestic and foreign investors, dependent on the sector and the location of the investment.
Greece’s business registration entity GEMI (General Commercial Register) has the basic responsibility for digitizing and automating the registration and monitoring procedures of commercial enterprises. More information about GEMI can be found at http://www.businessportal.gr/home/index_en. The online business registration process is relatively clear, and although foreign companies can use it, the registration steps are currently available only in Greek. In general, a company must register with the business chamber, tax registry, social security, and local municipality. Business creation without a notary can be done for specific cases (small/personal businesses, etc.). For the establishment of larger companies, a notary is mandatory. Establishing a limited liability company takes approximately four days with three procedures involved, including registering the business, making a company seal, and registering with the Unified Social Security Institution.
The Greek government does not have any known outward investment incentive programs. Capital controls were eliminated in September 2019.
Enterprise Greece supports the international expansion of Greek companies. While no incentives are offered, Enterprise Greece has been supportive of Greek companies attending the U.S. Government’s Annual SelectUSA Investment Summit, which promotes investment in the United States, and similar industry trade events internationally.
Greece saw a slight increase in perceptions of corruption, as it went up eight places to 60 on Transparency International’s 2019 Corruption Perception Index, from 67 in 2018. By contrast, the country had improved since 2012, partly due to mandatory structural reforms. Despite these structural improvements, burdensome bureaucracy is reportedly slowing the progress. Transparency International issued a report in 2018 criticizing the government for improper public procurement actions involving Greek government ministers and the recent appointment of the close advisor to the country’s prime minister to be the head of the Hellenic Competition Commission, which oversees the enforcement of anti-trust legislation. Transparency International released another report in October 2018, warning of the corruption risks posed by golden visa programs, mentioning Greece as a top issuer of golden visas.
On March 19, 2015, the government passed Law 4320, which provides for the establishment of a General Secretariat for Combatting Corruption under the authority of a new Minister of State. Under Article 12 of the Law, this entity drafts a national anti-corruption strategy, with an emphasis on coordination between anti-corruption bodies within various ministries and agencies, including the Economic Police, the Financial and Economic Crime Unit (SDOE), the Ministries’ Internal Control Units, and the Health and Welfare Services Inspection Body. Based on Law 4320, two major anti-corruption bodies, the Inspectors-Controllers Body for Public Administration (SEEDD) and the Inspectors-Controllers Body for Public Works (SEDE), were moved under the jurisdiction of the General Secretariat for Combatting Corruption. A Minister of State for combatting corruption was appointed to the cabinet following the January 2015 elections and given oversight of government efforts to combat corruption and economic crimes. The minister drafted coordinated plans of action, monitored their implementation, and was given operational control of the Economic Crime division of the Hellenic Police, the SDOE, ministries’ internal control units, and the Health and Welfare Services’ inspection body. Following the September 2015 national elections, the cabinet post of Minister of State for combatting corruption was abolished, and those duties were assigned to a new alternate minister for combatting corruption in the Ministry of Justice, Transparency, and Human Rights.
Legislation passed on May 11, 2015, provides a wider range of disciplinary penalties against state employees accused of misconduct or breach of duty, while eliminating the immediate suspension of an accused employee prior to the completion of legal proceedings. If found guilty, offenders could be deprived of wages for up to 12 months and forced to relinquish their right to regain a senior post for a period of one to five years. Certain offenders could also be fined from €3,000 to €100,000. The law requires income and asset disclosure by appointed and elected officials, including nonpublic sector employees, such as journalists and heads of state-funded NGOs. Several different agencies are mandated to monitor and verify disclosures, including the General Inspectorate for Public Administration, the police internal affairs bureau, the Piraeus appeals prosecutor, and an independent permanent parliamentary committee. Declarations are made publicly available. The law provides for administrative and criminal sanctions for noncompliance. Penalties range from two to ten years’ imprisonment and fines from €10,000 to €1 million. On August 7, 2019, Parliament passed legislation establishing a unified transparency authority by transferring the powers and responsibilities of public administration inspection services to an independent authority.
Bribery is a criminal act and the law provides severe penalties for infractions, although diligent implementation and haphazard or uneven enforcement of the law remains an issue. Historically, the problem has been most acute in government procurement, as political influence and other considerations are widely believed to play a significant role in the evaluation of bids. Corruption related to the health care system and political party funding are areas of concern, as is the “fragmented” anti-corruption apparatus. NGOs and other observers have expressed concern over perceived high levels of official corruption. Permanent and ad hoc government entities charged with combating corruption are understaffed and underfinanced. There is a widespread perception that there are high levels of corruption in the public sector and tax evasion in the private sector, and many Greeks view corruption as the main obstacle to the economic recovery.
The Ministry of Justice prosecutes cases of bribery and corruption. In cases where politicians are involved, the Greek parliament can conduct investigations and/or lift parliamentary immunity to allow a special court action to proceed against the politician. A December 2014 law does not allow high ranking officials, including the prime minister, ministers, alternate, and deputy ministers, parliament deputies, European Parliament deputies, general and special secretaries, regional governors and vice governors, and mayors and deputy mayors to benefit from more lenient sentences in cases involving official bribes. In 2019, Parliament passed a new amendment to Article 62 of the constitution, which limits parliamentary immunity to acts carried out in the course of parliamentary duties. Under the current constitution, parliamentary immunity applies to all acts conducted while in the office, irrespective if the act is connected to the parliamentary duties. In addition, Parliament amended Article 86 of the constitution, abolishing the statute of limitations for crimes committed by ministers and to disallow postponements for trials of ministers.
Greece is a signatory to the UN Anticorruption Convention.. As a signatory of the OECD Convention on Combating Bribery of Foreign Government Officials and all relevant EU-mandated anti-corruption agreements, the Greek government is committed in principle to penalizing those who commit bribery in Greece or abroad. The OECD Convention has been in effect since 1999. Greek accession to other relevant conventions or treaties: Council of Europe Civil Law Convention on Corruption, Council of Europe Criminal Law Convention on Corruption, and United Nations Convention against Transnational Organized Crime.
Resources to Report Corruption
Organization: The Inspectors-Controllers Body for Public Administration
Address: 60 Sygrou Avenue, 11742, Athens
Telephone number: +30-213-215-8800
Email address: email@example.com