Germany estimated to have made

€9bn profit out of crisis

By Valentina Pop
09.11.2011
Excerpt

BRUSSELS - 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.

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.

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Entire article online at: http://euobserver.com/19/114231