Germany’s conundrum

Germany’s export-driven success leaves it highly vulnerable to changes in global trade flows. It’s also facing broad structural pressures. The German consumer meanwhile continues to exhibit a strong preference for savings over consumption, which alongside the government’s own fondness for fiscal surpluses leaves domestic demand in the doldrums. This locks Germany into slow growth without addressing any of its core problems. It’s a story where tolerance for a stronger euro is fundamentally limited. We remain short euro versus the US dollar.

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