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Wednesday, 21 August 2013

Only losers in the credit crisis?! Well, not really… From a budgettary point of view, Germany is a big winner!

The winner takes it all
The loser has to fall
It's simple and it's plain
Why should I complain?

Today, there was surprising, but not really, news from Germany. This day, the German national Finance Ministry, the Bundesfinanzministerium, published the answers to an official inquiry by Joachim Poss, member of the Bundestag (German national parliament) for the SPD (social-democrat) party.

Poss had asked the Finance Ministry about the real costs of the euro-crisis for the German citizens.

The answer that Poss received today, might surprise the unsuspecting reader: as a direct consequence of the euro crisis and its enormous effects on the spreads between the various sovereign bonds of the Euro-countries, Germany saved(!) more than 40 billion euro’s in borrowing costs for public loans. 

Of course, the euro-crisis also led to extra expenses for the German government: an impressive €599 million(!). Balanced out, however, Germany has profited enormously from the Euro-crisis.

This story came not really as a surprise for me. I knew that investors bought ‘Bunds’ (and also Dutch public loans) at ridiculous prices, at the peak of the euro crisis. This led to near-zero interest rates for bondholders and almost free loans for the German national and regional governments.

The following lines come from Der Spiegel:

German Finance Minister Wolfgang Schäuble has every reason to smile.

Germany has profited from the euro crisis to the tune of 41 billion euros in reduced interest payments. Strong demand for its debt has cut yields and made it cheaper for Germany to borrow. Meanwhile, the crisis has only cost Germany a mere 599 million euros thus far.

Germany is profiting from the debt crisis by saving billions of euros in interest on its government debt, which has enjoyed a steep drop in yields due to strong demand from investors seeking a safe haven.

According to figures made available by the Finance Ministry, Germany will save a total of €40.9 billion ($55 billion) in interest payments in the years 2010 to 2014. The number results from the difference between actual and budgeted interest payments.
The information was released in response to a parliamentary inquiry from Social Democrat lawmaker Joachim Poss.

On average, the interest rate on all new federal government bond issues fell by almost a full percentage point in the 2010 to 2014 period. Financial investors regard Germany as a particularly safe creditor because of its solid state finances.

The Finance Ministry is trying to maximize the benefits of the low interest rates by placing more longer-term bonds at favorable rates. Between 2009 and 2012, the proportion of short-term debt issues with maturities of less than three years fell to 51 percent from 71 percent.

According to the Finance Ministry, the costs of the euro crisis for Germany have so far added up to €599 million.

I’m pleased for the Germans and I’m equally pleased that the Dutch government has saved so much money on its public loans.

However, there is something bothering me about this story:

Since 2010, the same countries Germany and The Netherlands have been constantly nagging and whining within the European Council and the EU Euro-Group meetings about the costs of the euro-crisis for their dear citizens.

The Bundesverfassungsgericht in Karlsruhe ( i.e. the German Constitutional Court) has been holding the whole EU as a hostage, due to their verdict that every important decision within the EU must be approved by the German Bundestag. This ridiculous verdict turned the European Council almost into a lame duck.

Wolfgang Schäuble, Jan Kees de Jager and Jeroen Dijsselbloem, the three finance ministers of Germany and The Netherlands, have acted like real ‘Scrooges’ during the last three years and blocked every serious rescue attempt for the PIIGS-countries most in need: Portugal, Spain and Greece.

Not only did these people tackle the development of a Marshall plan for the Southern European countries, which also dealt with the socio-economic consequences of the Euro-crisis.  No, with the division of the emergency loans into ‘small’ tranches of a few billion euro, they have prolonged the Greek, Spanish and Portuguese problems for years and years, making the citizens of these countries suffer from economic hardship, like a fish on the hook of a patient angler.

Of course, the eventual bill for the rescue packages and numerous state guarantees handed out for the EFSF (European Financial Stability Facility) and ESM (European Stability Mechanism) can be much, much higher than the current €600 million, before the crisis is over. However, I seriously doubt that it will ever be north of €41 billion.

So, today’s news means that it became finally clear that the credit crisis does not only have losers. No, there is also one clear winner. And yes, like in many football matches, the winner is: Germany!

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