As Europe's largest economy and second most populous nation, Germany remains a key member of the continent's economic, political, and defense organizations.

European power struggles immersed Germany in two devastating World Wars in the first half of the 20th century and left the country occupied by the victorious Allied powers of the US, UK, France, and the Soviet Union in 1945. 

With the advent of the Cold War, two German states were formed in 1949: the western Federal Republic of Germany (FRG) and the eastern German Democratic Republic (GDR). 

The democratic FRG embedded itself in key Western economic and security organizations, the EC, which became the EU, and NATO, while the Communist GDR was on the front line of the Soviet-led Warsaw Pact. 

The decline of the USSR and the end of the Cold War allowed for German unification in 1990. Since then, Germany has expended considerable funds to bring Eastern productivity and wages up to Western standards.

In January 1999, Germany and 10 other EU countries introduced a common European exchange currency, the euro.

Central Europe, bordering the Baltic Sea and the North Sea, between the Netherlands and Poland, south of Denmark

Germany's affluent and technologically powerful economy - the fifth largest in the world - has become one of the slowest growing economies in the euro zone. A quick turnaround is not in the offing in the foreseeable future. Growth in 2001-03 fell short of 1%, rising to 1.7% in 2004 before falling back to 0.9% in 2005. The modernization and integration of the eastern German economy continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $70 billion. Germany's aging population, combined with high unemployment, has pushed social security outlays to a level exceeding contributions from workers. Structural rigidities in the labor market - including strict regulations on laying off workers and the setting of wages on a national basis - have made unemployment a chronic problem. Corporate restructuring and growing capital markets are setting the foundations that could allow Germany to meet the long-term challenges of European economic integration and globalization, particularly if labor market rigidities are further addressed. In the short run, however, the fall in government revenues and the rise in expenditures have raised the deficit above the EU's 3% debt limit.