Germany: bad economy, good shares

Germany: bad economy, good shares - at Moneyweek.co.uk - the best of the week's international financial media.

Wherever you look around the world, you'd be hard pushed to find a more rubbish economy than Germany's. The days of its industrial supremacy are a distant memory, its economy is mired in incomprehensible bureaucracy, domestic demand is weak and unemployment hit a 72-year high in February. What Germany is going through right now can no longer be classed as merely a recession: it's more like a depression. GDP fell by 0.2% in the last quarter of last year. And on the face of it, there's little reason to think things will improve anytime soon. Any reform of its bureaucracy is nigh on impossible, thanks to the fact that civil servants effectively have their jobs for life; the ageing population combined with public hostility to immigration suggests ongoing budget deficits; and finally, the rise of global low-cost competitor economies, such as China and India, is turning out to be the last straw for high-cost manufacturing all over Europe.

Given all this, it's hardly a surprise to find that retail investors aren't showing much enthusiasm for the German market. But perhaps they should be. Last month, ABN Amro and the London Business School produced research that show there has never been a statistically significant link between a country's GDP growth and its future investment returns. It's the other way around: slow growth countries consistently deliver better performance.

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