Sunday

28th Aug 2016

Germany estimated to have made €9bn profit out of crisis

Germany has profited to the tune of €9 billion from the eurozone crisis over the past two years, an ING economist has calculated for EUobserver, as investors flock to "safe" but near zero interest rate bunds while southern euro-countries struggle with unsustainable rates.

"For a long while, the German economy has been one of the few beneficiaries of the sovereign debt crisis. In fact, the German government can get market funding almost for free," Carsten Brzeski, a senior economist with the ING bank in Belgium told this website.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

  • Germany's low borrowing costs have allowed the government to slash taxes even as other euro countries impose austerity measures (Photo: aranjuez1404)

Borrowing costs for Italian 10-year bonds on Wednesday (9 November) hit a figure of 7 percent more than German bunds - seen as a benchmark "safe" option by investors - on the back of political turmoil which has seen Italian Prime Minister Silvio Berlusconi promise to resign.

Deemed "unsustainable" by markets, the 7 percent red line was earlier crossed by Greece, Ireland and Portugal shortly before they sought EU and International Monetary Fund (IMF) aid.

France's 10-year bond compared to German bunds the same day hit a new high of 3 percent.

"With the latest stage of the debt crisis and France and Italy seemingly drowning in the maelstrom of the crisis, the German economy has lost its immunity. However, the continued flight-to-quality trend in bond markets is still spoiling the government with unexpected revenues," Brzeski explained.

The trend has steadily driven German bond yields close to zero since the European sovereign debt crisis began some two years ago.

Berlin's two-year bond yields currently stand at just 0.3 percent and its 10-year bonds at 1.7 percent. Six-month papers - usually giving the lowest return to investors - stand at just 0.08 percent, down from 0.3 percent just one month ago.

With strong economic growth in Germany last year and with investors increasingly looking to safe havens for their money, Brzeski calculated that Berlin's net profit for bond auctions compared to other countries in this period stands at around €9 billion.

"Interestingly, this is already more than the recently announced [German] tax relief of around €8 billion for 2013 and 2014. It almost looks as if the Greeks financed the little German tax reform," he added.

In another point of reference, €8 billion is also the figure Greece hopes to get in its next EU and IMF tranche once it has a provisional government in place and all parties sign a written letter for the prescribed austerity measures.

The money roughly covers Athens' state expenditures for a period of three months.

News in Brief

  1. Hungary plans to reinforce border fence against migrants
  2. France's highest court suspends burkini ban
  3. Greeks paid €1bn more in taxes in June
  4. Greek minister denounces EU letter on former statistics chief
  5. Turks seeking asylum in Greece may cause diplomatic row
  6. Merkel becomes digital resident of Estonia
  7. Report: VW will compensate US dealers with €1bln
  8. EU mulls making Google pay news media for content

Stakeholders' Highlights

  1. GoogleBrussels - home of beer, fries, chocolate and Google’s Public Policy Team - follow @GoogleBrussels
  2. HuaweiSeeds for the Future Programme to Bring Students from 50 countries to China for Much-Needed ICT Training
  3. EFASpain is not a democratic state. EFA expresses its solidarity to Arnaldo Otegi and EH Bildu
  4. UNICEFBoko Haram Violence in Lake Chad Region Leaves Children Displaced and Trapped
  5. HuaweiMaking Cities Smarter and Safer
  6. GoogleHow Google Makes Connections More Secure For Users
  7. EGBAThe EU Court of Justice Confirms the Application of Proportionality in Assessing Gambling Laws
  8. World VisionThe EU and Member States Must Not Use Overseas Aid for Promoting EU Interests
  9. Dialogue PlatformInterview: "There is a witch hunt against the Gulen Movement in Turkey"
  10. ACCAACCA Calls for ‘Future Looking’ Integrated Reporting Culture With IIRC and IAAER
  11. EURidNominate Your Favourite .eu or .ею Website for the .EU Web Awards 2016 Today!
  12. Dialogue PlatformAn Interview on Gulen Movement & Recent Coup Attempt in Turkey