Gamescom in Germany is now maybe the biggest video games exhibition, but where are the German games? Apart from Crytek what AAA game develoers are coming from Germany. And what about Spain and Itay, they can not complain about high costs for employees. 

France has Ubisoft (a lot of it in Canada).

Poland has CDProject RED and Techland.

Sweden has DICE, Mojang, Avalanche, Starbreeze.

Finland got Remedy, Bugbear, Frozenbyte (and of course Rovio and Supercell)

Netherlands got Guerrilla games

Denmark got IO Interactive (Hitman)

I will not list English and Scottish game developers.

So high cost countries can have game development but what about Germany, Spain, Italy and Russia?

Died due to excessive bratwurst eating and beer drinking..

Germany got for example:

Egosoft - The guys behind the X series
Piranha Bytes - Gothic and Risen
Yager Development - Spec Ops: The Line and Dead Island 2

We also have Koch Media, which owns Deep Silver.

Yeah germanys development culture is kinda sad for such a big country, we have Crytek, then the studios that make Sacred and Risen, I don't know if the Anno series is known outside of germany but we have that as well and then of course all the Simulator games. Though I don't even know if they are german, the farming simulator developer seems to be based in switzerland.

Oh didn't know about that.

Oh and before I forget.

We also have Factor 5! The masterminds behind Lair!

If you dig deeper into German developers you will find a lot of mid tier stuff that most gamers heard about but never played.

They made great games for N64 and GC - are they still alive?

I hope Shin'en will rise and get big on Nintendo.

Nope, gone.

There are quite a few german game developers. They're just not as well known as Ubisoft, DICE, etc.

Just sort this by country: http://en.wikipedia.org/wiki/List_of_video_game_developers