1. Introduction

In this book we will provide a long-run perspective on the developments of the German financial system and an analysis of if and how ‘financialisation’ played out in Germany. This will provide the grounds for our analysis of how the German economy was then affected by the financial and economic crisis 2007–2009 and finally managed to quickly recover from this crisis. Our book has four main parts. In the first part, we take a look at the long-run development and structure of the German financial system. The second part deals with the major characteristics of the financial sector in terms of the degree of competition, profitability and efficiency. In the third part we turn to the relationship of the financial sector with the other sectors of the economy. Finally, in the fourth part, we address the effect of the increasing dominance of finance on the macro-economy focussing on the effects on income distribution, the long-run macroeconomic regime, the financial and economic crisis and the recovery from the crisis.