CAMPBELL: I've come to the Bavarian capital, deep in the south of Germany, to solve a mystery. Why is Germany's economy going gangbusters while countries like Greece are going down the gurgler?

In Munich, home of Oktoberfest, people like to work hard and play hard, so what better way to start my Bavarian journey than with a beer or two?

The Hofbrauhaus has a proud tradition of selling vast quantities of its specialty brew. Tonight the beer hall is as busy as it's been in two hundred years.

HELMUT ZANKEL: "Drink... drink!"

CAMPBELL: (drinks) "Bavarian beer".

CAMPBELL: Helmut Zankel and his friends have been coming to the same table three times a week for as long as they remember.

"This place is busy, Helmut. Where is the economic crisis? Not in Bavaria?"

HELMUT ZANKEL: "In Bavaria? Not at all".

CAMPBELL: "Definitely not?"

HELMUT ZANKEL: "No. No ship is sinking, there's no earthquake. There's no flood - we're living in paradise".

CAMPBELL: "And the beer is tasty".

HELMUT ZANKEL: "The beer is tasty and the food as well".

CAMPBELL: "But everything here is better than in Greece, for example".

HELMUT ZANKEL: Better than anywhere in the world".

CAMPBELL: It's common to hear Bavarians boast that they're the best in the world. This was a separate kingdom until 1871 and outsiders still have to work hard to be accepted.

"Helmut, to Bavaria!"

HELMUT ZANKEL: "You have to drink now. He's not drinking. This is not English beer that doesn't get drunk".

CAMPBELL: "It's much better. Best in the world!"

HELMUT ZANKEL: "Oh, now he gets it. It took some time, but he's getting it".

CAMPBELL: But right now, Bavaria does have a lot to boast about. It's the richest state in Germany, which is now the richest big country in Europe. In the midst of the Euro zone crisis, business is booming, exports are rising and unemployment is at a twenty year low. Helmut's retired but his five children have all found jobs in Munich.

HELMUT ZANKEL: "All my kids have work".

CAMPBELL: "No unemployment?"

HELMUT ZANKEL: "No, no, no".

CAMPBELL: Lately, Bavaria's become a magnet for Europe's economic refugees. Juliana Salija escaped war torn Yugoslavia 17 years ago for a better life in Greece. Two months ago she fled Greece where one in five is now jobless.

JULIANA SALIJA: "I love that place but it was impossible... impossible".

CAMPBELL: "So how is Bavaria in comparison to Greece?"

JULIANA SALIJA: "I've got a job, I've got a little apartment and I love here because it is actually international.... easier to live. Not to go to sleep with the thought am I going to have enough to live tomorrow".

CAMPBELL: Not bad for a place best known for questionable fashion, endless 'oom-pa-pa' music and excessive beer consumption.

HELMUT ZANKEL: "Oh, now he's drinking with two hands. I don't think it's going to work".

CAMPBELL: So what um Himmels Willen is their secret? Well we all know Bavaria makes some not bad cars from BMW - Bavarian Motor Works - to Audi. But the secret of their success goes even deeper. Now to find out we need to leave the big city and go out in the countryside in search of a very teutonic concept called - 'Mittelstand'.

The concept of Mittelstand goes back long before there were Audi sports cars or even Porches - back to when people rode horses and what we now call Germany was a loose network of independent kingdoms, principalities and free cities.

Each area tried to stand out from the others by specialising in its own products, from beer to leather shorts to leather shoes. Centuries on, not much has changed.

"So how long have your family been making shoes?"

LUKAS MEINDL: "Over 300 hundred years all in the same place here in Kirchansching".

CAMPBELL: "That's extraordinary. Three hundred years in the village?"

LUKAS MEINDL: "Yes, very long but a huge long tradition and I still did learn the profession of shoe-making".

CAMPBELL: Lukas Meindl is the 11th generation shoemaker in the Meindl family. His specialty, trekking boots, now sell to more than forty countries but much of the production and quality control are still based in the family's old village of Kirchansching near the Austrian border, population just 1500 people. One hundred and twenty of them, including his relatives, work in this factory.

"This is the one you use in dancing isn't it? You put your knickerbockers on and your lederhosen and away you go?"

LUKAS MEINDL: "It's a nice boot, eh?

CAMPBELL: "Yeah".

LUKAS MEINDL: "But this is a real tradition".

CAMPBELL: Lukas and his cousin Markus say they'll never leave.

MARKUS MEINDL: "I think it's one of the safest and most beautiful places all over the world, so why should we go away from here? This is our tradition, this is our heritage here. We can't move. No way".

CAMPBELL: This is what Germany calls a 'Mittelstand'. There's no work like it in English because it refers to a deep-seated German tradition - family-owned businesses, usually in the provinces, that make niche products for the world market. Forget the big car companies, these speciality firms account for more than half of Germany's exports and they've hardly been dented by the Euro zone crisis.

LUKAS MEINDL: "At the moment you know Germany has a very good situation. Even when there's talk about the crisis Germany is very very prepared because we still produce. We built up something in Germany and we have something different than the other countries are doing in the world. This makes us different to the others. And this is the reason why we have still jobs, we have still a situation where people like to live. This makes a difference".

CAMPBELL: Cousin Markus runs the clothing side of the business.

MARKUS MEINDL: (looking at photos on wall) "Down there that's me, that's Lukas my cousin and that's my other cousin Berndt, you know".

CAMPBELL: He specialises in that great Bavarian tradition, leather pants.

MARKUS MEINDL: "You know this is one my grandpa did, it's about 80 years old. This is a hand stitched one. We do the same today, you know?"

CAMPBELL: "People still wear Lederhosen?"

MARKUS MEINDL: "Yeah a lot of them".

CAMPBELL: "Truly?"

MARKUS MEINDL: "Yeah, yeah".

CAMPBELL: "Some people do suggest they're a fashion crime".

MARKUS MEINDL: "No, Lederhosen is a culture you know and this is something you can be proud of it you have a right one you know?"

CAMPBELL: This is not just a provincial clothing store. Typically for a Mittelstand, it punches far above its weight, attracting international customers like the Terminator himself, Arnold Schwarzenegger.

MARKUS MEINDL: "These are our friends in the end, not really customers you know?"

CAMPBELL: "Does Arnold Schwarzenegger wear Lederhosen?"

MARKUS MEINDL: "Yeah, a lot of them".

CAMPBELL: "In public?"

MARKUS MEINDL: "A lot of them - jackets, leather trousers, yeah, yeah coats - a lot of things from us he has yeah".

CAMPBELL: More on the Terminator later. The biggest concentration of Mittelstand businesses is here in Bavaria, a region with few natural resources but a long history of craftsmanship. Unlike many multi-national corporations, they don't chase short-term profits or dabble in high-risk investments.

MARKUS MEINDL: "You know, we don't have to think about investing money in finance and make dirty money. We invest our money in our products and we invest in our workers. That's the reason why for us the future is still always one step after the other one and we are safe because we don't invest too much money, what we can't afford. So that's the thinking of our grandfather, of our father and you can only buy what you can afford - nothing more".

CAMPBELL: And that conservative philosophy is working remarkably well. While businesses elsewhere in Europe are drowning in debt, most Mittelstand businesses are boringly solvent and stable. They don't pay millions to CEOs to strip staff, smash unions and boost quarterly shareholder returns. Instead, they foster staff loyalty by keeping them on in good times and bad. Some workers have been at Meindl for more than forty years. The planning focus for the family is the next generation.

LUKAS MEINDL: "I have 2 boys. One boy is 8 years and one is 5 years".

CAMPBELL: "A future shoemaker there, you think?"

LUKAS MEINDL: "I don't know now, but we'll see if they like it. I think it's important that people see, as the boys at least now see, what we do. When they like it, we help them - and we hope they like it".

CAMPBELL: "The Mittelstand embodies the kind of Victorian values of prudence and thrift and saving that Margaret Thatcher tried to instil in Britain. But the problem of Thatcherite deregulation was that it also led to greedy banks offering easy loans that put the whole country in debt. Now here Bavarians have gone down a very different path. Instead of borrowing money to buy stuff, they saved money while they made stuff and they made it so well, the rest of the world wanted to buy it. Weird, huh?"

And the rules apply to Bavaria's biggest corporations as much as to shoemakers. Dr Anton Kathrein runs one of the world's largest electronic components companies. He's proud to call it a Mittelstand.

DR ANTON KATHREIN: "We are Mittelstand. Mittelstand is not depending on the size - how many people you have in the company... employees... how many turn over. It's a mentality... it's a philosophy. And I am still responsible for the company. It means if the company goes bankrupt I am personally bankrupt. It is a high motivation. The other motivation is, on the product is my name, the family name 'Kathrein'. It's also high motivation for the quality and to be reliable for the customers. Customers can trust my name. So for me the name is important. In Germany we say 'der Ehrbare Kaufmann' - that means we are trusting each other. If you give a handshake it's a handshake, it's a contract. Not lawyers with hundreds of papers".

CAMPBELL: His father founded the company in 1919, as a one man business in a cellar, making lightning conductors.

DR ANTON KATHREIN: "So it was a very tough situation after World War First, he had no money but he had an idea, a vision, and the vision was a product".

CAMPBELL: "Wow and you've gone from a one man operation to one of the world's biggest antenna companies?"

DR ANTON KATHREIN: "We are the oldest and biggest antenna company worldwide. We have now 6,700 people. The turnover this year is over 1.4 billion Euros and we are still a private company and third generation is waiting. My son is just finishing his studies in Karlsruhe - the best university in Germany - and he will then, mid of this year be back here, and will help me".

CAMPBELL: It makes decidedly unsexy products, from antennas, to widgets and thingamies, to things that go into other things. But Dr Kathrein is passionate about every part of his business and he owns every centimetre of it.

DR ANTON KATHREIN: "There is no money from the banks. It's paid already. I'm happy about this. So there is no crisis. Also banks ask me, don't you want to go to the stock exchange? Don't you want to be a blue chip? And I said yes it's interesting but yeah you can earn a lot of money then and what shall I do with the money? You have to reinvest it and where? Yeah in telecommunications. I am in telecommunications. I don't need this! So I'm still here and I'm independent and I have no problems with the banks".

CAMPBELL: He doesn't have a problem with trade unions either.

DR ANTON KATHREIN: "For sure we have the union here because we're the largest metallic and electronic company in this field. So we have a union but we never have problems with the union. We're working together as partnership. For sure sometimes they have different ideas, but it's normal, that is normal. But at the end of the day we are working together to be successful for the company and to keep the people here, to keep employees here or to increase the number of employees. And this I think is the right situation - not to fight".

CAMPBELL: Like most Mittelstand businesses, it's still based in the provincial town where it all began. Here, the problem isn't regional unemployment, it's finding enough people to do the work.

Not so long ago the money men of Wall Street and London thought Germany was a bit of a joke. Still manufacturing things in villages when the real money was in just shuffling money around, making collateralised debt obligations or structured asset backed security tranches or other things too complex to understand for which they paid themselves billions of dollars while destroying the global economy. Well no one's laughing at Germany now. Tempting as it might be.

Bavaria in particular is a place where men aren't afraid to wear funny hats. They're intensely proud of their traditions and right now they're feeling rather virtuous. Unlike their European neighbours such as Greece, they haven't ruined their economy by living beyond their means. And they're in no rush to bail out their neighbours.

LUKAS MEINDL: "We're very annoyed about this for sure, because it's very easy to understand that we have to pay now the bills for the others and this is very difficult to do, no? Personally I see it as, only to give money to someone and they're not changing it's the wrong way. Who is paying the bills has to make the decision. I think this is a clear rule and when countries are not following these rules then we cannot help. This must be the rules because we cannot work in this way - build up something and then the money is taken away from our country to other countries that's not changing anything".

CAMPBELL: Like most of their German brethren, Bavarians are insisting the rest of Europe has to change its ways. If countries like Greece want Germany's help, they have to agree to live within their means. They want governments to collect proper taxes and like German shoppers, to balance their budgets.

DR ANTON KATHREIN: "For sure these countries they have to not spend too much money, they have to earn money".

CAMPBELL: "They have to be more like Germans?"

DR ANTON KATHREIN: "Or Bavarians!" (laughter)

CAMPBELL: A lot of Greeks are already like Bavarians. Munich has one of Europe's biggest Greek communities thanks to guest workers who came to Germany in the 1960s. George Gergianakis is the son of a guest worker and has lived in both Germany and Greece but he moved back to Bavaria with his Greek American wife Georgia to raise their children.

GEORGE GERGIANAKIS: "I speak Greek to them, my wife speaks English to them because she's from Boston and they learn German in school - and we combine the three cultures".

CAMPBELL: This Sunday is a special day for the family, eight year old Emmanuela is performing for the Greek congregation. (child playing violin) George and his wife both worked in Athens in the boom times, helping to plan the 2004 Olympics, but even then they could tell the good times were built on the sands of debt. The news they're now getting from Greece has confirmed they were right to have their children here.

GEORGE GERGIANAKIS: Doctors Without Borders here they asked for support for Greece now, for medicine and support for the poor and the needy for food. So the problem seems to be, ah becoming more dramatic right now and we expect a very, very difficult year in 2012 and everybody's very anxious right now. We are receiving weekly I think, questions from friends and from family members to come here to work. So we are very.... we are very anxious and very curious to see what's going to happen in the next, in the short term, yeah?"

CAMPBELL: The difference they find in Bavaria is that the system works. Unlike in Greece, you don't have to know someone or bribe someone to get things done.

GEORGE GERGIANAKIS: Bavaria as a state is very reliable. You can rely on everything, whereas Greece the role that the state plays is very different. I mean you cannot rely on the healthcare system, you cannot rely on public services because in order to get the service that you want you have to have relations in place or a network in place, and that makes the things difficult".

GEORGIA GERGIANAKIS: "But that doesn't mean we don't love Greece, we really do love Greece and the culture and the sunshine - can't take that away from Greece".

CAMPBELL: Like most people in Munich the family is renting while it saves to buy. Germany frowns on consumer debt. In contrast, George's 70 year old father in Greece was until recently plagued by banks trying to lend him money.

GEORGE GERGIANAKIS: "If you wanted to apply for a mortgage loan, in Germany you have to go through many checks and it was very difficult traditionally, whereas in other countries and Greece is just one example, this has changed rapidly after the membership of the European Union and the Euro so that everybody was offered loans and they accepted naively and at the end everybody is in debt now in Greece and getting out of this requires a stable work environment and a stable income which is not the case anymore - which brings everything to a collapse I think right now".

GEORGIA GERGIANAKIS: "I do hope that one day our children can experience living in Greece through their work because it's a really nice experience to have. But if the economy continues the way it's going then there won't be jobs for them in Greece".

CAMPBELL: But as much as George and Georgia despair for Greece, even they don't believe Germany should bail out Greek debt.

GEORGE GERGIANAKIS: "If you give money it's like pouring water into sand".

CAMPBELL: Even so Germany can't stay aloof from the problems of its neighbours. The Alps won't protect it from the debt contagion and Europe is still its main export market.

Across the border in the Austrian town of Kitzbel, the Audi car company is spending big. It's sponsoring a downhill ski race to promote the snow-handling qualities of its new models. For big companies like Audi, the Euro has been a boon, allowing them to trade in one currency across most of Europe. Marketing Manager, Peter Schwarzenbauer hopes Germany will do whatever it can to preserve it.

PETER SCHWARZENBAUER: "I think everybody, at least all the responsible politicians know that this is the only way we can go and I'm totally convinced that if we meet here again in ten years we still we talk about the Euro and we'll still talk about that the Euro was the right decision".

CAMPBELL: "But will all the countries still be in it like Greece?"

PETER SCHWARZENBAUER: "I think that still all countries will be in, I would guess that probably even more than today".

CAMPBELL: "Really? What would be the effect if Germany lost the Euro, had to go back to the Deutschmark and deal with the lira and the schilling and the frank?"

PETER SCHWARZENBAUER: "This is a scenario I don't even want to think about. It will not happen".

CAMPBELL: Despite the crisis, Audi is actually expecting to increase sales this year and it's not afraid of spending money to make money. It's brought in a bevy of celebrities to glamour up the brand. There are celebrity athletes, celebrity actors and celebrity celebrities.

"What do you think of the global economic crisis?"

WOMAN: "Oh it's terrible of course".

CAMPBELL: "You're against it?

WOMAN: "I'm against it?"

CAMPBELL: "Yeah".

WOMAN: "Oh yeah I'm against it of course".

CAMPBELL: Peter Schwarzenbauer has even hooked a celebrity Lederhosen wearer, Arnold Schwarzenegger!

(shouting) "Mr Schwarzenegger, Mr Schwarzenegger what do you think about Mittelstand values?" (Arnie keeps walking)

Unfortunately, we didn't get to find out.

Back in Audi's Bavarian headquarters, we did learn more about Mittelstand values. While it's now one of the biggest car corporations, it's origins lie in four small carmakers who merged in the Great Depression. Peter Schwarzenbauer credits the company's endurance to its Mittelstand origins.

PETER SCHWARZENBAUER: "One of the secrets of success is that it still feels like a Mittelstand company. I mean we have 60,000 people on board but it's still very familiar, you know? You know people, we have short decision cycles so we are working like a Mittelstand company, even being a big international corporation".

CAMPBELL: Even with its automated robots, the company employs more than 30,000 people in its production plant in Ingolstadt and even more abroad.

"And you're not sacking your staff every time things get a bit tight?"

PETER SCHWARZENBAUER: "No. Exactly. I mean the last crisis in 2008/2009 now we stick to our people here in the factory, we kept everybody on board and this was I think one of the main reasons why we came out much faster, much stronger in the crisis than anybody else".

CAMPBELL: The challenge for Germany, with its disciplined, well-ordered tax paying society is how to operate in a continent of vastly differing values. It's unclear how the single currency can survive in a continent where some work to live, while others live to work. But for now, Germany's success, nowhere greater than in Bavaria, is something to celebrate.