While Britons and Americans are gloomy about deficits and possible recession, for Germans it is as if 2008 never happened.

Germany has just reported the highest export figures since records began. While there are worries about the euro, this is only because other eurozone members are so weak. Germans predict a “golden decade” ahead for their own country.

That may be hyperbole, but there is no denying that Germany is now in a relatively strong position. There is no mystery to that success. Successful nations, businesses, and entrepreneurs all follow a very simple formula: provide others with the goods and services they want, but keep a firm grip on the finances.

The firm grip on the finances has been the Merkel government’s great contribution. Even left-leaning German ministers were scornful of the British – and, by implication, American – government attempts to borrow their way out of the 2008 crisis. The results of the differing approaches are plain to see: Germany came out of the crisis quicker and stronger.

As for providing the goods and services people want, the German way has always been to compete on the basis of quality rather than price. If you want something done cheaply, go to China; if you want it done to perfection, go to Germany.

This gives the lie to the accusation that business favours globalisation because it relies on “cheap labour”. German labour costs are high, but the business community – unlike its critics – has always understood that quality has a price, and has never objected to paying that price so long as it gets value for money. It objects to high labour costs only when there are no viable products or services in return for its investment.

Germany’s high labour costs are – usually – justified by the high quality of both the labour and its end product. This quality in turn owes much to the superiority of the German secondary, tertiary, and technical education systems. When American and British entrepreneurs are asked why they no longer locate their factories in their home countries, they usually cite the high labour costs – but they are just as likely to mention how the state schools there are not providing them with workers fit for employment. Indeed, many of them would rather employ a German who has been taught excellent English than a native English-speaker. Germany has itself become a successful brand name again.

In our recent podcast on the euro, we discussed the possibility that the preservation of the European single currency might depend on weaker nations, such as Greece, leaving it.

That possibility is now being taken seriously by the markets.

It is, however, curious that they expressed their concern by devaluing the euro against the dollar. Logic dictates that the euro should be worth more if it does not have to underwrite the budget deficit of the spendthrift Greek government.

It might be the best thing that could happen to the euro if Greece left it for a while, followed by Portugal and perhaps even Spain. Those are the countries which ran up the worst government deficits – despite the euro’s supposedly strict rules – and which are still reluctant to tackle them. Ireland also ran up a horrendous deficit, but seems prepared to take firm measures.

Needless to say, there are vociferous official denials. Equally needless to say, those denials are not being believed.

The authors of this blog are not currency speculators, nor are we qualified to advise others on currency speculation, but, if we were, we might be tempted by the prospect of putting surplus cash into euros.

Something has to be done. Something is going to be done. If the Greek government and the other basket cases do not do it, someone else will. The Germans are getting impatient. When they act, the euro will be strengthened – and they will act soon if no one else does.

German business confidence is high. The country that gave us the Wirtschaftswunder, the original post-War “economic miracle”, may be Europe’s best hope for the future.

Perhaps the real miracle is that the Germans are so optimistic, given Germany’s underlying problems. The labour market is still over-regulated and Germany’s welfare state ensures that salaries are a relatively small proportion of the costs of employing people there. Germany is also the cornerstone of the ailing single European currency, and will almost certainly be presented with the bills for bailing out a succession of less disciplined countries in the near future.

Nevertheless, Germany has definitely retaken her traditional position as Europe’s most competitive economy – after losing it, briefly, to the UK in the mid-1990s. Other nations would do well to study the reasons for this...

1              Fiscal Discipline. Two years ago, German politicians from both sides of the political spectrum were united in their contempt for British and American plans to spend their way out of recession. Instead, they followed their own strict austerity programme. The result: Germany was out of recession before the UK and the USA, and is now two years ahead on the road to recovery.

2              Technology. Germany defies the decline of European industrial competitiveness thanks to a national obsession with constant technical innovation and precision. The Germans accept they cannot compete with the developing world on price and instead dedicate their whole economy to competing on quality. In Germany engineers have more status than lawyers – if only America could say the same!

3              Education. German Universities may not be as trendy as the American Ivy League or British Russell Group, but the German secondary education system is one of the best in the world, and their commitment to technical education is, predictably, given the national obsession, unsurpassed. A general population who are literate, numerate, comfortable in foreign languages, and technically skilled provides a better pool of potential entrepreneurs and key workers than a surplus of academic degrees.

4              Reputation. The emphasis on technical quality pays off. The German brand name is as strong as ever. Success builds success.