Can German Faith Save The Euro? (FXE, VGK, EWG, EWQ, EWU EWI)

March 30, 2012

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Europe needs to invest more in German faith to save the Euro

By Christophe Adrien, Associate Writer, Wall Street Sector Selector

Greece has narrowly avoided default but continues to face demise. Spain has made headlines for national protests over a recent turn of government cuts. Britain (NYSEARCA:EWU), France (NYSEARCA:EWQ), Portugal, Italy (NYSEARCA:EWI), among many others, face tough austerity measures in the near future shadowed by the specter of runaway debt. And the Germans (NYSEARCA:EWG)? Amid challenges presented by their neighboring partners, unemployment numbers dropped to the lowest point since German reunification (1). Germans continue to fund the dysfunctions of other European countries at great personal expense. For an economy in full upswing, the benefits of a European partnership for Germany are beginning to encounter scrutiny in parts of the financial sector (NYSEARCA:XLF).

France (NYSEARCA:EWQ), Europe’s second largest economy after Germany, has suffered credit downgrades, market volatility, and a slough of other problems as a result of participating in the Greek bailouts (granted France was headed in that directed with or without the Greek debt crisis). If France is any indication of how dangerous bailing out your neighbors can be, then Germans have every reason to hold disdain for the current status quo of the Eurozone. Recent rumors in the markets (2),(3), in which Germans may seek to leave the Euro (NSYEARCA:FXE), may sound like complete sauerkraut to the well informed, but recent history has shown that even the slightest of rumors might cause disastrous consequences in the markets.

Germany’s unemployment announcement should be viewed as a positive. They are clearly demonstrating that despite financial hardships an economy can continue to flourish given the befitting leadership. An appropriate word to describe Germany’s attitude towards the current economic situation is faith. Germans (NYSEARCA:EWG) believe that they can flourish despite lending their hard earned money to others; Germans believe they can continue to progress. Too many countries have lost belief in themselves. If one does not believe in their abilities, one is less likely to succeed. France (NYSEARCA:EWQ), for example, is a predominantly pessimistic country. The French have little faith in their government. As the second largest economy in Europe, France’s growth has stagnated.

Europe (NYSEARCA:VGK) needs to invest more heavily in the German state of mind. If more European countries had the same faith in themselves as the Germans, the debt crisis would subside much more quickly. Germany will not leave the Eurozone because they have invested in the belief that the Eurozone (NYSEARCA:FXE) will prevail. Germans have faith the Euro will rebound from the current crisis. If Greeks, Portuguese, French, Italians, and even the British take example from the Germans, we could see a prosperous, united Europe take the global economic lead. Until then, the world will need to live with a Europe on the brink.

Bottom Line: Look to Germany to continue to lead the pack by example. Europe may not fully follow the German je-ne-sais-quoi yet, but Europe’s integrity and future depend of a shift towards more unity.

Christophe Adrien is an associate writer for Wall Street Sector Selector. Born in California, Christophe Adrien spent his formative years in France. He attended university in Oregon and has earned a Master of Arts in Teaching degree from Oregon State University. At university, Christophe conducted extensive studies in the field of History, specializing in the political cultures of France and Russia. Christophe speaks English and French natively, is fluent in Spanish, and has experience with German, Russian, and Latin. Having traveled the globe extensively, Christophe has cultivated a unique view of the global economy, its origins, and the current state of global affairs.