July 7, 2010
Berlin, Germany
As I’m in Berlin for some quick business, I wanted to take a few minutes to talk about planting flags in Germany; perhaps today is an appropriate day to do so as the Deutschland national football team is taking on Spain in tonight’s World Cup semi-final… and there are German flags flying everywhere.
As a place to visit or plant a residency flag, Germany is a personal call. You might love it– the history is really unique, the people are nice enough, and the nightlife is really interesting (often adult-oriented). I like it fine, but there are more exciting places in Europe for my taste.
As a place to establish tax residency, Germany should definitely not be considered. Individual income tax rates can be as high as 67%, and the government taxes its official residents, both foreign and citizen, on their worldwide income.
As a place to establish a citizenship flag, Germany is a valuable passport. Germans have visa free travel to more countries than the US and Canada, and they’re not ill favored in the world.
Unfortunately, it’s not one of the countries whose nationality laws provide ancestral citizenship… so if your grandparents were German, it won’t make much of a difference to you.
Germany does provide for naturalization after 8 long years of permanent residency… but Belgium is a much easier option at only 3-4 years, and it’s an equally valuable passport.
I do know of people who have gained German citizenship by going through the process of being married or adopted, but this is not a good forum to discuss that.
As a place to plant an emergency flag, where you would go in the event of a global meltdown, I would give Germany mediocre marks (no pun intended). The country has enough food, water, and arable land to sustain itself, but I worry about its energy security.
For now, Germany has too much reliance on foreign nations to import critical oil and gas supplies. The government has been pushing for renewable sources, and while these have been growing, Germans would probably freeze to death if they were shut out by Russia.
In my assessment, Germany does score rather well when it comes to investing and business opportunities.
The German economy is one of the largest and most powerful in the world; I think it serves as a reasonable model of how a modern, developed, industrialized nation can simultaneously be among the wealthiest in the world but still have a solid manufacturing and export base.
Yes, there are problems, starting with their bloated welfare programs and high tax rates. The government appears to be taking positive steps with unpopular austerity measures, but I really doubt these will stick in the long run.
Regardless, though, the overall German savings rate is quite high at 12.8% of their disposable income. Germans have money, and they save quite a bit of it. For entrepreneurs, this makes the country a solid consumer market, as well as a great place to source investment capital.
For workers and professionals, there are reasonable employment opportunities in the country for would-be expats; the German labor market has been steadily strengthening, and multinationals are hiring once again.
In terms of an investment flag, there are some opportunities in Germany. Thanks to decades of gross economic mismanagement by the Spanish, Greek, and Italian governments, quality German assets are selling at a discount for non-euro investors.
The entire eurozone has suffered, and will continue to suffer, because of the most rotten apples in the bunch… so in a way, investing in Germany gets you Deutschmark assets at a Greek drachma discount.
I’m rather averse to most European equity markets right now (with the exception of Cyprus and a few others). I do think, however, that German real estate may be a reasonable speculation.
The country never experienced a massive real estate boom, so prices never got out of control. At $3,500 per square meter of residential space, an apartment in Berlin is not much more expensive than top-end property in Panama! And it’s a hell of a lot cheaper than what I’ve seen recently in Spain and Italy.
The rental yield is not spectacular at 5%, but I think that property prices could rise significantly on a currency-adjusted basis. When (not if) the eurozone finally breaks apart, the new German (or modified eurozone) currency will be much stronger, resulting in fantastic profits
