What’s up with Germany these days?
With the Greek bailouts, they’ve conspicuously said that they don’t want to lead the Euro-zone, they just want everyone else to follow the rules. But Germany is the undisputed kingpin of continental Europe. They have the largest economy, largest population, and largest trade surplus. Since German manufacturers compete on quality, not on price, a stronger Euro doesn’t hurt their exports all that much.
Germany has become the indispensible nation. No solution to the European debt crisis is possible without their assent, or without their input. That’s one of the ironic twists of the Strauss-Kahn fiasco: the Frenchman had excellent communications with both the Greek and German leaders.
But Germany doesn’t like being indispensible. It means that they’re always wrong. In foreign policy, if they’re aggressive they’re establishing a Fourth Reich; when they abstained in the Libyan vote they were accused of being pacifists. Because Angela Merkel insisted on institution of austerity programs in Greece, Ireland, and Portugal before pledging hundreds of billions towards a bailout , it is German meanness, not generosity, that is noted.
If a populist figure arises in Germany who could exploit the public’s resentment of its involuntary leadership, Germany could pull back from full engagement. But that doesn’t seem likely right now. Instead, we have a Germany that must choose—between provincialism and a global role.
Douglas R. Tengdin, CFA
Chief Investment Officer
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