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Germany’s double whammy: Trouble ahead for euro zone stalwart?

Germany's biggest carmaker and its biggest bank are both undergoing tectonic shifts which could shake the country's strong economic foundations.

With the impact of the emissions scandal on Volkswagen, one of the country's biggest employers, still unknown, and close to 4,000 job losses expected at Deutsche Bank in Germany, as it undergoes a high-profile restructuring, dents may emerge in Germany's apparently iron-clad economic strength.

German Chancellor, Angela Merkel
Tobias Schwarz | AFP | Getty Images
German Chancellor, Angela Merkel

Export figures, where much of that strength is located, were already starting to turn even before the Volkswagen scare. In August, exports recorded their biggest fall in six years, as trading partners in emerging markets cut orders. While the month is traditionally weak, the fall of 5.2 percent was larger than forecast.

German businesses and consumers were less optimistic about the economy in October than September, according to a survey by the European Commission published last week.

Later this week, German factory orders data should give some clues as to whether Volkswagen's problems are affecting overall manufacturing yet.

The country's much-prized political stability, in a post-credit crisis era when many other major European powers have seen rising support for less centrist parties, has also been questioned.

There is a serious division emerging in the Chancellor Angela Merkel-led coalition. Her Christian Democratic Union (CDU) and its Bavarian sister party, the CSU (Christian Social Union), are at odds over migration. Bavaria's border with Austria is the ultimate goal for many of the refugees trying to get into Germany – and it is the CSU's local politicians who are trying to manage the social and financial fallout from the expected arrival of close to 1 million migrants this year.

Speculation about an end to Merkel's chancellorship after her current term expires in 2017 is just "alarmist" at this stage, according to Carsten Nickel, senior vice president at Teneo Intelligence. He points out the lack of challengers to her crown, and the failure for her main opposition, the SPD (Social Democratic Party), to gain ground.

"The CDU/CSU could in principle fall much deeper in the polls than now and still retain the chancellery," he argued in a research note.

- By CNBC's Catherine Boyle