Germany Uber Alles?

The German stock market is making new highs. But what is Germany, really?

Source: National Geographic

For many people, Germany calls up images of the Bavarian castles or the Rhine. For others it’s Oktoberfest and lederhosen, or the Autobahn, or cathedrals. Still others get their images from old war movies.

For me, Germany has always meant 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.

German DAX at a record. Source: Bloomberg

But 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 solution to the Greek debt crisis 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.

The German state was origially a confederation of peoples designed to promote defense and commerce. If they want the Euro to survive, Germany will have to bring some order to Europe’s chaos. That will require leadership. Let’s hope they’re up for it.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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