Long Term Euro Zone Investment Outlook

The Euro Zone may or may not be digging itself out of its sovereign debt crisis. What is the long term Euro Zone investment outlook? And, what factors besides sovereign debt will affect the long term Euro Zone investment outlook? With thoughts about the best places on earth to invest in mind we would like to look at Germany, by far the largest economy in Europe. Economically the USA and EU as a whole rank one and two. These two leading economies are followed by China and Japan. German by itself would rank number 5 followed by France, the UK, Brazil, Italy, and India. Germany accounts for a third of the EU total GDP ($3,397,562 million versus $16,242,256 million for the EU as a whole) according to 2010 IMF figures.

Thus a look at Germany may give us a hint as to long term Euro Zone investment outlook. In Germany’s favor are a highly skilled labor force and strong cultural work ethic. The nation is a leader in exports of complex machinery, chemical, equipment and vehicles. A drawback for Germany as well as much of the EU is demographic. Germany has a low fertility rate and immigration is slowing down. Thus the nation is becoming top heavy with retirees and seeing increased pressure on its social welfare system. Also Germany is often seen as the “paymaster of Europe” as its largest economy. This can become a drag on the German economy as the Euro Zone increases its lending limit again .

Although Germany is commonly thought of as an exporter of goods, such as the Mercedes Benz and BMW, its economy is heavily weighted to services at 71% versus 28.1% industry according to 2010 figures. The nation has forty-three million workers as of 2011. However, the demographic demon may be a problem here as more and more Germans take well deserved retirement. There is an employment reserve among the unemployed with an unemployment rate that stand at around seven percent. The ability of the vaunted German industrial machine to find, train, and retain skilled workers may be critical for the German subset of the long term Euro Zone investment outlook. Over time the best stock investing tips for German companies may have to do with company by company technical and fundamental analysis and not with German stock indexes.

Long term Euro Zone investment outlook outside of Germany runs from lukewarm to frightening. Spain is dealing with twenty-five percent unemployment and Greece expects to see a shrinking economy as it suffers from severe austerity measures imposed as a price for the latest debt rescue. The Greek financial collapse was averted at the last minute but the fact that the EU is already increasing its lending limits has many concerned that a year or so from now the Euro Zone will at risk, again, of a domino effect series of financial defaults. As usual we are not suggesting investment in Europe or that an should investor avoid opportunity on the continent. Rather we offer this discourse as an example of thinking through possible investments over the long term.

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