The Celts are believed to have been the first inhabitants of Germany. They were followed by German tribes at the end of the 2nd century B.C. German invasions destroyed the declining Roman Empire in the 4th and 5th centuries A.D. One of the tribes, the Franks, attained supremacy in western Europe under Charlemagne, who was crowned Holy Roman Emperor in 800. By the Treaty of Verdun (843), Charlemagne's lands east of the Rhine were ceded to the German Prince Louis. Additional territory acquired by the Treaty of Mersen (870) gave Germany approximately the area it maintained throughout the Middle Ages. For several centuries after Otto the Great was crowned king in 936, German rulers were also usually heads of the Holy Roman Empire.

By the 14th century, the Holy Roman Empire was little more than a loose federation of the German princes who elected the Holy Roman emperor. In 1438, Albert of Hapsburg became emperor, and for the next several centuries the Hapsburg line ruled the Holy Roman Empire until its decline in 1806. Relations between state and church were changed by the Reformation, which began with Martin Luther's 95 theses, and came to a head in 1547, when Charles V scattered the forces of the Protestant League at Mühlberg. The Counter Reformation followed. A dispute over the succession to the Bohemian throne brought on the Thirty Years' War (1618–1648), which devastated Germany and left the empire divided into hundreds of small principalities virtually independent of the emperor.

Meanwhile, Prussia was developing into a state of considerable strength. Frederick the Great (1740–1786) reorganized the Prussian army and defeated Maria Theresa of Austria in a struggle over Silesia. After the defeat of Napoléon at Waterloo (1815), the struggle between Austria and Prussia for supremacy in Germany continued, reaching its climax in the defeat of Austria in the Seven Weeks' War (1866) and the formation of the Prussian-dominated North German Confederation (1867). The architect of this new German unity was Otto von Bismarck, a conservative, monarchist, and militaristic Prussian prime minister. He unified all of Germany in a series of three wars against Denmark (1864), Austria (1866), and France (1870–1871). On Jan. 18, 1871, King Wilhelm I of Prussia was proclaimed German emperor in the Hall of Mirrors at Versailles. The North German Confederation, created in 1867, was abolished, and the Second German Reich, consisting of the North and South German states, was born. With a powerful army, an efficient bureaucracy, and a loyal bourgeoisie, Chancellor Bismarck consolidated a powerful centralized state.

Wilhelm II dismissed Bismarck in 1890 and embarked upon a “New Course,” stressing an intensified colonialism and a powerful navy. His chaotic foreign policy culminated in the diplomatic isolation of Germany and the disastrous defeat in World War I (1914–1918). The Second German Empire collapsed following the defeat of the German armies in 1918, the naval mutiny at Kiel, and the flight of the kaiser to the Netherlands. The Social Democrats, led by Friedrich Ebert and Philipp Scheidemann, crushed the communists and established a moderate state, known as the Weimar Republic, with Ebert as president. President Ebert died on Feb. 28, 1925, and on April 26, Field Marshal Paul von Hindenburg was elected president. The mass of Germans regarded the Weimar Republic as a child of defeat, imposed upon a Germany whose legitimate aspirations to world leadership had been thwarted by a world conspiracy. Added to this were a crippling currency debacle, a tremendous burden of reparations, and acute economic distress.

Adolf Hitler, an Austrian war veteran and a fanatical nationalist, fanned discontent by promising a Greater Germany, abrogation of the Treaty of Versailles, restoration of Germany's lost colonies, and the destruction of the Jews, whom he scapegoated as the reason for Germany's downfall and depressed economy. When the Social Democrats and the Communists refused to combine against the Nazi threat, President von Hindenburg made Hitler the chancellor on Jan. 30, 1933. With the death of von Hindenburg on Aug. 2, 1934, Hitler repudiated the Treaty of Versailles and began full-scale rearmament. In 1935, he withdrew Germany from the League of Nations, and the next year he reoccupied the Rhineland and signed the Anti-Comintern pact with Japan, at the same time strengthening relations with Italy. Austria was annexed in March 1938. By the Munich agreement in Sept. 1938, he gained the Czech Sudetenland, and in violation of this agreement he completed the dismemberment of Czechoslovakia in March 1939. His invasion of Poland on Sept. 1, 1939, precipitated World War II.

Hitler established death camps to carry out “the final solution to the Jewish question.” By the end of the war, Hitler's Holocaust had killed 6 million Jews, as well as Gypsies, homosexuals, Communists, the handicapped, and others not fitting the Aryan ideal. After some dazzling initial successes in 1939–1942, Germany surrendered unconditionally to Allied and Soviet military commanders on May 8, 1945. On June 5 the four-nation Allied Control Council became the de facto government of Germany.

(For details of World War II and of the Holocaust, see Headline History, World War II.)

At the Berlin (or Potsdam) Conference (July 17–Aug. 2, 1945) President Truman, Premier Stalin, and Prime Minister Clement Attlee of Britain set forth the guiding principles of the Allied Control Council: Germany's complete disarmament and demilitarization, destruction of its war potential, rigid control of industry, and decentralization of the political and economic structure. Pending final determination of territorial questions at a peace conference, the three victors agreed to the ultimate transfer of the city of Königsberg (now Kaliningrad) and its adjacent area to the USSR and to the administration by Poland of former German territories lying generally east of the Oder-Neisse Line. For purposes of control, Germany was divided into four national occupation zones.

The Western powers were unable to agree with the USSR on any fundamental issues. Work of the Allied Control Council was hamstrung by repeated Soviet vetoes; and finally, on March 20, 1948, Russia walked out of the Council. Meanwhile, the U.S. and Britain had taken steps to merge their zones economically (Bizone); on May 31, 1948, the U.S., Britain, France, and the Benelux countries agreed to set up a German state comprising the three Western zones. The USSR reacted by clamping a blockade on all ground communications between the Western zones and West Berlin, an enclave in the Soviet zone. The Western Allies countered by organizing a gigantic airlift to fly supplies into the beleaguered city. The USSR was finally forced to lift the blockade on May 12, 1949.

The Federal Republic of Germany was proclaimed on May 23, 1949, with its capital at Bonn. In free elections, West German voters gave a majority in the Constituent Assembly to the Christian Democrats, with the Social Democrats largely making up the opposition. Konrad Adenauer became chancellor, and Theodor Heuss of the Free Democrats was elected first president.

The East German states adopted a more centralized constitution for the Democratic Republic of Germany, put into effect on Oct. 7, 1949. The USSR thereupon dissolved its occupation zone but Soviet troops remained. The Western Allies declared that the East German Republic was a Soviet creation undertaken without self-determination and refused to recognize it. Soviet forces created a state controlled by the secret police with a single party, the Socialist Unity (Communist) Party.

Agreements in Paris in 1954 giving the Federal Republic full independence and complete sovereignty came into force on May 5, 1955. Under the agreement, West Germany and Italy became members of the Brussels treaty organization created in 1948 and renamed the Western European Union. West Germany also became a member of NATO. In 1955, the USSR recognized the Federal Republic. The Saar territory, under an agreement between France and West Germany, held a plebiscite and despite economic links to France, elected to rejoin West Germany on Jan. 1, 1957.

The division between West Germany and East Germany was intensified when the Communists erected the Berlin Wall in 1961. In 1968, the East German Communist leader, Walter Ulbricht, imposed restrictions on West German movements into West Berlin. The Soviet-bloc invasion of Czechoslovakia in Aug. 1968 added to the tension. West Germany signed a treaty with Poland in 1970, renouncing force and setting Poland's western border as the Oder-Neisse Line. It subsequently resumed formal relations with Czechoslovakia in a pact that “voided” the Munich treaty that gave Nazi Germany the Sudetenland. By 1973, normal relations were established between East and West Germany and the two states entered the United Nations.

West German chancellor Willy Brandt, winner of a Nobel Peace Prize for his foreign policies, was forced to resign in 1974 when an East German spy was discovered to be one of his top staff members. Succeeding him was a moderate Social Democrat, Helmut Schmidt. Schmidt staunchly backed U.S. military strategy in Europe, staking his political fate on placing U.S. nuclear missiles in Germany unless the Soviet Union reduced its arsenal of intermediate missiles. He also strongly opposed nuclear freeze proposals.

Helmut Kohl of the Christian Democrat Party became chancellor in 1982. An economic upswing in 1986 led to Kohl's reelection. The fall of the Communist government in East Germany left only Soviet objections to German reunification to be dealt with. On the night of Nov. 9, 1989, the Berlin Wall was opened, making reunification all but inevitable. In July 1990, Kohl asked Soviet leader Gorbachev to drop his objections in exchange for financial aid from (West) Germany. Gorbachev agreed, and on Oct. 3, 1990, the German Democratic Republic acceded to the Federal Republic and Germany became a united and sovereign state for the first time since 1945.

A reunited Berlin serves as the official capital of unified Germany, although the government would continue to have administrative functions in Bonn during the 12-year transition period. The issues of the cost of reunification and the modernization of the former East Germany were serious considerations facing the reunified nation.

In its most important election in decades, on Sept. 27, 1998, Germans chose Social Democrat Gerhard Schröder as chancellor over Christian Democrat incumbent Helmut Kohl, ending a 16-year-long rule that oversaw the reunification of Germany and symbolized the end of the cold war in Europe. A centrist, Schröder campaigned for “the new middle” and promised to rectify Germany's high unemployment rate of 10.6%.

Tension between the old-style left-wing and the more probusiness pragmatists within Schröder's government came to a head with the abrupt resignation of Finance Minister Oskar Lafontaine in March 1999, who was also chairman of the ruling Social Democratic Party. Lafontaine's plans to raise taxes on industry and raise German wages—already nearly the highest in the world—went against the more centrist policies of Schröder. Hans Eichel was chosen to become the next finance minister.

Germany joined the other NATO allies in the military conflict in Kosovo in 1999. Before the Kosovo crisis, Germans had not participated in an armed conflict since World War II. Germany agreed to take 40,000 Kosovar refugees, the most of any NATO country.

In Dec. 1999, former chancellor Helmut Kohl and other high officials in the Christian Democrat Party (CDU) admitted accepting tens of millions of dollars in illegal donations during the 1980s and 1990s. The enormity of the scandal led to the virtual dismemberment of the CDU in early 2000, a party that had long been a stable conservative force in German politics.

In July 2000, Schröder managed to pass significant tax reforms that would lower the top income-tax rate from 51% to 42% by 2005. He also eliminated the capital gains tax on companies selling shares in other companies, a measure that was expected to spur mergers. In May 2001, the German Parliament authorized the payment of $4.4 billion in compensation to 1.2 million surviving Nazi-era slave laborers.

Schröder was narrowly reelected in Sept. 2002, defeating conservative businessman Edmund Stoiber. Schröder's Social Democrats and coalition partner, the Greens, won a razor-thin majority in Parliament. Schröder's deft handling of Germany's catastrophic floods in August and his tough stance against U.S. plans for a preemptive attack on Iraq buoyed him in the weeks leading up to the election. Germany's continued reluctance to support the U.S.'s call for military action against Iraq severely strained its relations with Washington.

Germany's recession continued in 2003—for the previous three years Europe's biggest economy had the lowest growth rate among EU countries. In Aug. 2003, Schröder unfurled an ambitious fiscal reform package, and called his proposal “the most significant set of structural reforms in the social history of Germany.” The reforms reduced some of the benefits of Germany's generous social welfare system, including national health insurance and unemployment compensation.

Gerhardt Schroeder's Social Democratic Party (SPD) suffered a devastating defeat in local elections in May 2005, ending the party's 39-year reign in Germany's most populous state, North Rhine-Westphalia. The election was seen as a referendum on Schroeder's economic reform programs, which have done little to rejuvenate the economy and have angered many Germans accustomed to their country's generous social welfare programs. The reforms have reduced such programs as unemployment benefits at a time when unemployment has reached an alarming 12%. Schroeder announced that he will seek early elections, in Fall 2005 instead of Sept. 2006, and appears to be taking a gamble that despite this defeat, when given the bald choice between the SPD and the conservative CDU and its leader Angela Merkel, the electorate will continue to support him.