The eurozone had an extraordinarily good performance in the second half of 2006. But how well is it going to perform at a time of financial turbulence, of the kind we saw last week?

Let me try to answer this question for Germany, which is currently popular among global investors. The general story is that Germany has overcome its unification shock, improved cost competitiveness and undertaken politically difficult reforms that are finally paying off in terms of higher economic growth and lower unemployment.