It is not without foundation that Germans are characterised as pessimistic. A friend once went to a doctor to ask how long it would take his (minor) ailment to heal, only to be told: “You must remember that after the age of 30, the body starts to die.”
Existential angst is not uncommon in the country that literally invented the concept, but as the roll-call of companies laying off thousands of manufacturing workers continues to grow – steel giant ThyssenKrupp (DE:TKA) is to cut 40 per cent of its workforce and joins Bosch, VW (DE:VOW3), Bayer (DE:BAYN) and car parts maker Schaeffler (DE:SHA0) in making major layoffs or shutting down factories located in Germany – this has serious consequences for European growth: the traditional economic powerhouse of the continent finds itself at a major crossroads.
While a slump every eight years or so is to be expected in a manufacturing economy, this feels different and is without parallel in the Federal Republic since reunification. But investors should remember that the link between Germany’s woes, plus a possible debt crisis in France, does not necessarily translate into a slump in the stock market. In fact, the EuroStoxx 50 has been in positive territory since the start of the year, with a modest 5 per cent gain (although anyone sitting on the 28 per cent made by an S&P 500 tracker will scoff at that).