Germany News 2015
Remarkably low interest-rates are a key feature of the stable but stagnant financial system of Germany. Low interest-rates show the meager global economic growth and monetary policy which is directed at reducing the negative impact on economy Europe-wise. According to the Bundesbank's Financial Stability Review of 2015, the longer the interest-rates are at their minimum, the more incentive have the market participants to take risks. In an economy were risk premiums are falling to extreme low level, there is a major cause for worry as to the endangerment of financial stability. The only way the government can make people invest is to keep the sovereign rates low. Otherwise, the build-up of cash in coffers might prompt the normalization measures to be put away. Precisely this will cause further risks to accumulate and businesses to stop operating in a proper way.
But with such low interest-rates there is a definite impact on the German bank's earnings and stability. But the drawbacks have been limited so far. Banking institutions have strengthened their stance in the last few years, according to the Bundesbank Executive Board. By increasing capital and reducing borrowing, banks have secured their short-term future from collapse. But we should point out that such low interest-rates would first of all affect small and medium-sized banks, which might take greater risks to secure an acceptable profits margin for their stakeholders. There has been no real downturn of German stocks prices of these banks, but excessive risk-taking comes at a cost.
Germany News 2015: German stocks
If we turn to German stocks market, it was rallying high at the start of 2015, but the second half of the year saw it stuck in reverse gear.
The flagship DAX index, has been steadily falling since mid-April, when it closed at a record high of 12374, but thereafter it was seeking new lows.
There has been a cocktail of factors that has caused the bearish mindset of investors in German stocks. Primarily a sell-off that happened in the bond market, instability in the value of the Euro currency and the ongoing problems of millions of migrant coming to the Eurozone and Germany in particular.
The DAX’s problems show broader issues with equities in the Eurozone, which surged in the first months of 2015 due to the stimulus program of the European Central Bank that provided substantial amount of cash flow into Europe's stock markets.
Germany News 2015: Factors that affected German economy
Indeed, there was so much hype about the stimulus that many European assets went for a bullish run. And later in the year investors reassessed their points of views and became more realistic.
More recently and more importantly, growing uncertainty over Greece's future has cast a shadow over stocks in the Eurozone, especially over Germany as the major bail-out provider. Athens have been so far struggling to hammer out a deal with creditors and that had a bearish impact on major German indices.
Finally, taking into account the weakness of Euro against the US Dollar in the second half of 2015 there may be a substantial buy-out of German stocks, as they have become cheaper for American investors Some investors see the recent weakness as a strong buying opportunity, particularly because of better than expected yearly results of the major European economy.