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Germany

Germany. Agenda. Overall economy & market forecasts for 2012~2013 Impacts on Germany if the Euro collapses Will Merkel survive the next election? ETFs recommendation. Net export to act as a drag on growth. Exports contribute about 48% in total GDP.

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Germany

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  1. Germany

  2. Agenda • Overall economy & market forecasts for 2012~2013 • Impacts on Germany if the Euro collapses • Will Merkel survive the next election? • ETFs recommendation

  3. Net export to act as a drag on growth • Exports contribute about 48% in total GDP. • 40% of German exports goes into Eurozone countries. • Trade deterioration in 2012 • Negative external trade contribution to growth.

  4. Main drivers of GDP • Household consumption • Steady gains in employment • Confidence of domestic demands

  5. Impacts on Germany if the Euro collapses • Better off? • Worse off?

  6. Better off • Cut down expenses • Save the money used for bailouts • Cost 7% of GDP over several years to bailout Europe’s debt-burdened countries

  7. Better Off • Reduce the German National Debt • Switch back to Deutschemark • Repay German national debt rapidly

  8. Worse off • A slowdown in trade • Leading high production country in European • Decline of net export industrial products • Strong Deutschmark leads problem in manufacturing • Decrease in exports

  9. Worse Off • Potentially wreck the banking system • nearly €500 billion outstanding balance are GONE • Need to spend €480 billion to establish special funds

  10. Will Merkel Survive the Next Election? • In order to maintain Euro zone economy, Merkel tries to rescue Euro debt crisis. • 80% Germans opposite Merkel’s plan. • The welfare of countries in debt crisis: Less working time High salary Early retirement age

  11. Will Merkel Survive the Next Election? • Christian Democratic Union(CDU) lost in the election in North Rhine-Westphalia • The main opposition parties to Christian Democratic Union - Social Democrats(CDU) - Greens

  12. The Result of Election in North Rhine-Westphalia 34.9 50.4

  13. Challenge to Merkel • Greeks resist Merkel’s policy • Greeks have no intention to cut their benefits.

  14. ETF recommendation • MSCI Germany Index Fund (EWG) • CurrencyShares Euro Trust (FXE)

  15. MSCI Germany Index Fund (EWG) • The MSCI Germany Index Fund (EWG) is tracking the German Exchange Index. • Good time for investors to buy some calls right before the end of Euro crisis (maybe June 2013). $22.5 R(e)=12.5%

  16. EWG

  17. CurrencyShare Euro Trust (FXE) • CurrencyShares Euro Trust (FXE) is tracking the value of Euro. • We recommend investors to consider holding a longer position of FXE for the long term(from end of 2012 to June 2013). $130 R(e)=6.5%

  18. FXE

  19. CONCLUSION • The prospects of German economy are still optimistic. • Merkel’s team is trying their best to pull Euro and the European economics back on the track. • EWG and FXE

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