Take a moment, investors, to mark the fall 20 years ago of the Berlin Wall – a visible, tangible end to an era, delivered in a few short episodes of confusing, inspiring, gut-wrenching events. The so-called experts fell silent, while the masses gained a voice.
Pressures in East Germany had been building for months. But on 9 November, a chance remark by a low-ranking East German official suggesting one checkpoint along the formidable Wall might be unguarded led hundreds to make a break for freedom. The drama was relayed moment by moment, for the first time, to a global audience.
The entire Wall, which started out in 1961 as a barbed-wire fence, was not to be officially demolished until the summer of 1990. But tearing it down was the catalyst for, among many other things, the re-unification of East and West Germany, the end of the Cold War, the collapse of other Soviet satellite states, the later launch of ‘privatisation’ programmes spawning an oligarch class in Russia, the rise of globalisation, the foundation for the European Union and its expansion eastwards, the basis of the Exchange Rate Mechanism and the euro.
Enjoying the last weeks of the 1980s post-Big Bang boom, the West left Germany to sort out the aftermath in Berlin. It was to prove a long and expensive business. Despite the occasional sector bubble (real estate and commodities), and injections of cash from guilt-ridden public financial institutions, East Germany never really caught the imagination of either global or domestic investors. Pieces of that famous graffiti-daubed Wall were more sought after than GDR factories.
West Germans were urged to commit their hard-earned cash to help out. Few felt inclined to do so, remaining fearful and often resentful of their poorer cousin. As the rest of central and eastern Europe opened up, investment followed production to the highly entrepreneurial Czech Republic and Hungary, and then to Bulgaria and Romania. Oil and commodity-rich Russia offered a more compelling, if more challenging, opportunity.
Yet regional experts say the East German story is not quite over. The growing influence in Europe of Chancellor Angela Merkel, herself raised in the east, is a positive. Secure within a united Germany, economic growth and investment is improving. The World Bank, the EBRD and the EIB have offered another E25bn regional rescue package.
For investors, appetite for all emerging markets weakened through the credit crunch and the more exotic destinations simply vanished from most advisors’ radar screens. But a handful of highly regarded specialists have been delivering consistently strong performance – Karine Hirn’s East Capital and funds managed by the likes of Robin Geffin and Jupiter’s Elena Shaftan.
The ninth of November, quite rightly, will be marked with a great street party across Berlin. Museums, exhibitions, and tours and performers have been planning the commemoration for months. A symbolic wall of giant foam dominoes, running the whole length of the original, will be toppled. Dignitaries from far and wide are expected.
It doesn’t quite add up to a buying opportunity, but global investors owe East Berliners a ‘massive’ debt of gratitude.
This week, feel free to party like it’s 1989.
