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“Achtung Baby: Germany Is Riskier Than You Think”

Via: Huffington Post

While everybody’s rightly worried about Spain as the next likely victim of the European debt crisis, nobody’s thinking much about Germany. It could be in more trouble than we realize.

That’s the message of a presentation making the rounds Tuesday on Wall Street by Carmel Asset Management, a New York investment firm. Entitled Achtung Baby: Germany Is Riskier Than You Think,” the presentation points out that Germany has been the sponge soaking up Europe’s debt problems for more than two years now — and that it helped finance the debt booms in Greece, Spain and other peripheral European countries that led to the eventual bust. This is all bad news for Germany’s long-term financial health, Carmel warns.

“Periphery debt is now the Federal Republic of Germany’s problem,” Carmel writes in the presentation, which is available in full at the Zero Hedge blog.

Typically when Germany is mentioned in relation to the rest of the eurozone, it is the Debbie Downer who won’t let anybody do anything fun, like stimulate the economy or issue joint European bonds. Its fever for austerity has helped investors think of it as an uber-safe haven. That’s one reason its two-year debt yields recently turned negative: Investors are so desperate for Germany’s perceived safety that they’re willing to actually pay money to let the German government hold their money for safekeeping.

But Germany is not immune, Carmel warns. It is getting punished in four very specific, very awful ways:

– Germany’s central bank, the Bundesbank, has taken on the burden of some of the bad debts of struggling European countries, as a result of being the primary cash source for repeated eurozone bailouts.

– The Bundesbank is also suffering from the bad debts of German private banks that loaned to struggling countries.

– German banks that still have those bad debts on their books are suffering, too.

– Germany’s export-driven economy is taking a hit from the slowdown in trade accompanying Europe’s rolling financial crises and recessions.

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Read more, HERE:

http://www.huffingtonpost.com/2012/06/05/germany-european-debt-crisis_n_1571464.html?ref=business

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personal thought:

I can’t help think, sooner or later, there will be a ‘German Spring’; and the voters will demand their government stop bailing out their Southern neighbors.

Perhaps even a return to the ‘Deutsche Mark’?

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June 6, 2012 - Posted by | Uncategorized | , , , ,

2 Comments »

  1. This is the sort of nonsense professor Sinn in Germany was coming out with late last year. But if germany were truly committed to the euro this would not be a problem. Capital is flowing from the periphery to the core and all the while Germany maintain an artificially under valued currency by comparison to their EZ partners. The debt that the rest of the Ez is now laden with was fuelled by profligate German lending to keep buying German goods. Check the trade balances of Ireland, Spain, Portugal and Greece pre and post the euro…then check germanys. For more in-depth analysis on this skip to about half way through this….

    http://acassconsult.com/attachments/File/Acass_Economic_Monitor_-_February_2012.pdf

    Comment by Target2 is the key | June 6, 2012 | Reply

  2. ‘Opinions are like assholes, everyone has one’. Thanks for sharing.

    Comment by seattle99 | June 6, 2012 | Reply


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