Reichstag building in Berlin. Photo: Matthew Field. Source: Wikimedia
For some, Germany calls up images of the Bavarian castles and cruises on the Rhine. For others it’s Oktoberfest and lederhosen, or the Autobahn, or cathedrals. Still others get their images from old war movies or re-runs of “Hogan’s Heroes.”
For the markets, Germany means business. Sited between the low countries and the Alps, between the Western democracies and an autocratic East, Germany has been a crossroads of culture, trade, tourism, and science. In fact, for centuries, German universities were considered the best in the world. Shakespeare pays tribute to German learning when Hamlet proposes going back to the University of Wittenberg.
Germany is a paradox. Having failed twice to unite Europe by force, it has become the preeminent economic power on the continent. The Bundesbank is the most powerful member of the European Central Bank coalition; any financial progress in the Euro-zone requires German support.
But they’re a reluctant leader. After World War 2, their devastation and Russia’s expansive ambitions required extensive American involvement. Churchill famously quipped that NATO was designed to keep the Germans down, the Americans in, and the Russians out. But the rise of a Germany-dominated Eurozone in the post-Cold War era has been chaotic. Germany has exported austerity and rules, but not productivity.
Angela Merkel was just formally elected chancellor of Germany, the fourth time she will lead the government since 2005. This time, she will preside of a grand coalition of her center-right Christian Democrats (CDU) and the center-left Social Democrats (SPD). Apparently, the two centrist parties have more in common with each other than they do with the far-right or far-left. Together, the coalition controls 399 seats of the 709-seat Bundestag.
Bundestag seat distribution. The CDU seats are black, the SPD is red. Source: Wikipedia
The German state was first a confederation of principalities and free states designed to promote defense and commerce. If they want the Euro to survive, Germany will have to bring some order to Europe’s chaos. So far, Germany has provided the financial and political leadership necessary to hold the Euro together. Let’s hope they can keep it up.
Douglas R. Tengdin, CFA