Europe’s largest economy is especially valued as business location for its transportation and telecommunications infrastructure, the high quality of research and development and its well-trained workforce, according to the European Attractiveness Survey by Ernst & Young, the accounting firm.

The annual poll of over 600 executives found that Western Europe remains the most attractive region for foreign investment — standing up to the challenge of both the United States and China — despite its high costs.

"What makes Europe remain the most attractive destination for investment is the flexibility and the diversity of markets present in the region," said Ernst & Young Chairman and CEO James Turley.

"Knowledge is a key factor drawing investors to Western Europe, but in the last five years, economies in Central and Eastern Europe have been transformed from low-cost workshops into markets with huge potential."

Individually, Germany ranked fifth worldwide as an investment location, down from third place in 2004. It earned top rankings for its transport and logistics infrastructure, domestic market local labor skills level and quality and capacity of research and development.

Germany came in second, behind the UK, in terms of access to financial investors, transparency and stability of the regulatory climate, social climate and language and culture. In terms of aid and support measures from public authorities, Germany ranked second behind France.

Germany lagged behind other countries in terms of labor costs.

In the future, high-tech products and services will have a significant impact on the German economy, ahead of sectors like telecommunications, chemicals and automotive, according to survey findings.

The survey makes clear what Germany’s strengths are, said Ernst & Young partner Peter Englisch.

"German engineers continue to enjoy a good reputation," he said in a press release. "Foreign investors know that they will find an outstandingly educated and motivated workforce. Germany’s future lies in research and development, in the high-tech arena.