-->Soros Betting Big on Germany

Is Germany the next big global economic success story?

Some stock market observers think so.

With orders for goods and supplies flowing in from eastern Europe and the Pacific Rim, Germany has now surpassed the United States as the world’s largest exporter.

In an op-ed piece for London’s Guardian newspaper, Ambrose Evans-Pritchard notes that Germany’s trade surplus is now greater than that of China, Japan and India combined, having reached a staggering 16.8 billion euros in June alone. And the profits raked in by German companies are running at over 33% of national income - the highest in 40 years, he adds.

All this has fueled an early stampede of big-name investors, like billionaire George Soros, who is pouring money into the country’s banks and financial institutions on the cheap. Soros is betting that German banks will soon be crammed with cash after several lean years.

All told, foreigners poured almost $87 billion into German equities in May and June alone, says Germany’s Bundesbank.

They do so in the hope that the country's high unemployment rate - which stands at 10.4% - and an imminent government changeover will see Social Democrat Gerhard Schroder walking off into the political sunset.

A new political regime, under Angela Merkel, is already beating the drums for a 25% flat tax and the elimination of 90,000 individual tax rules.

Says finance minister-in-waiting Paul Kirchoff:"We will smash down the tax barriers, break the cycle of resignation. I'll be there myself on hand with a big sledgehammer. We want to give the citizens back their freedom and let them decide for themselves what they want to do with their incomes.”

Pritchard says more and more European Union countries are following a similar path.

Germany, The Netherlands, Denmark, Sweden, Austria, Belgium and Spain - not to mention the flat-tax fire-breathers Poland, Slovakia and the Baltics - have all starved the public sector over the past decade.

The exceptions, he writes, are France and Britain, which grow ever fatter.

Data from the OECD (Organization for Economic Cooperation and Development) shows that the French will take 54% of GDP by 2006, while the UK will take 45% - against 46% for Germany.

“It does not take much extrapolation to see that Britain could soon be Europe's sick man again, gasping and choking with the worst of the big-government sclerotics,” he points out.