International Investing: Germany

Country Overview: Germany's $2 trillion economy emerged from a long period of stagnation last year to post a 2.2% growth rate, cutting unemployment to about 7%. The last two decades have been dominated by the modernization and integration of the economy of the former East Germany, a costly, long-term process.

Unemployment and an aging population have pushed social welfare outlays to a level exceeding contributions.

The current government of Chancellor Angela Merkel has initiated reforms that include the gradual raising of the mandatory retirement age from 65 to 67 and measures to increase female participation in the labor market. Germany hopes that corporate restructuring and improving capital markets will help it meet the long-term challenges of integrating Europe.

What to Watch: Porsche, BMW, Daimler and Volkswagen -- what does the future hold for the German car sector? Asian competition, the push for environmentally friendly vehicles, high oil prices and the ever strengthening euro create a rather difficult mix.

But, the hottest question right now: is Porsche planning to buy much bigger German car maker Volkswagen?

Right now Porsche holds around 31 percent in VW shares, but it is believed the company will increase that holding to over 51 percent in the near future.

Porsche says it is indeed planning to get involved on a strategic level but has no plans to launch a full takeover. Still, the European Commission’s plans to cut the CO2 fleet emission limit to around 120gr per KM makes for an interesting twist to the story, as it would signal an end to Porsches' independent survival.

Determined to stay in business, Porsche is ready for the challenge, warning it would even go as far as to sue the European Commission over the emission limits.

Porsche now lobbies for the EU to either give it a 'special status' with a special 'Porsche emission limit' or to increase the overall emission target.

However, should all fail, before going to court, Porsche could decide to launch a full VW takeover offer after all.

By doing that, it could hide its own CO2 emission under VW's more fuel-efficient fleet.