When bonds go up, equities usually come down. But that didn't happen when euphoria spread across Europe in the few days after the Berlin Wall fell. "Both markets surged together," recalls Wolfgang Matis, 42, then a fast-rising fixed-income trader at Deutsche Bank in Frankfurt.
Reality soon set in: Within days, bond markets headed back down. But the fall of the Wall was the trigger that led to the transformation of Europe's financial markets. "If East Germany hadn't collapsed, there might never have been a euro," says Matis, now Deutsche's managing director of fixed income for Europe. France, Britain, and other European countries were wary of a reunited Germany, but set aside fears in return for then-German chancellor Helmut Kohl's commitment to back the euro.
Kohl's pledge bore fruit last January, when the single currency made its debut. Now, with a huge new capital market on their doorsteps, European banks are better placed to fight back against the U.S. investment banks that have made inroads into Europe. Deutsche is now the No. 1 bank for euro-denominated, fixed-income securities.
Matis' feelings about the fall of the Wall aren't all favorable. "Ten years later, east and west are still not integrated," he says. The success in recent eastern German elections of the successor to the Communist Party shows just how wide the divide is. "When I look back, the sinister thing about the Wall is that it shows how far political systems actually can affect people's thinking," says Matis. The Wall casts a long shadow.