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Beacon of stability: The foundations of Germany’s success

With this news the Deutsche Bank Research closes a successful year 2016 and looks forward: “The country’s economic success is no fleeting episode, however. It is a phenomenon of the period since the Second World War achieved in spite of significant challenges such as post-war rebuilding, a EUR 2 tn reunification cost, the global financial crisis, and problems across the single currency area. Indeed, Germany’s economic and political stability is unique among the major developed countries.” Germany´s success is based on the interaction of many structural factors, some of which complement and mutually reinforce each other: (1) Macro policies focused on stability and growth (2) Institutions grounded in German ‘ordo liberalism’ (3) Global companies with unique structures (4) An equitable system of social security and cooperative social partners (5) A long-term perspective by companies and citizens with the willingness to forgo immediate reward – one of the most important factor in the success. The report of DB Research highlights low private and public-sector debt, a considerable willingness to train and long-term corporate strategies are the result of specific behavioural patterns. In behavioural science these patterns are referred to as self-regulation and the ability to forgo instant gratification. This leads to high levels of educational success, a rather low marginal propensity to consume and high savings ratios coupled with a greater willingness to protect the environment. In macroeconomic terms, these characteristics help to foster low inflation rates and low levels of debt, or to sum it up in one word: stability. The outlook is also rather positive for Germany, all over all we can start with confidence into 2017.