(Reuters) Analysis: What taxpayer bailouts? Euro crisis saves Germany money

A delegate of Germany's anti-euro party ''Alternative fuer Deutschland'' (Alternative for Germany) waves a German flag during the first party congress in Berlin April 14, 2013. REUTERS/Fabrizio Bensch

By Jan Strupczewski

BRUSSELS | Thu May 2, 2013 5:04am EDT

(Reuters) – Throughout Europe’s debt crisis, northern European leaders have often said they will not stand for taxpayers having to fork out for other countries’ problems, and the notion of “taxpayer-funded bailouts” has taken root.

Yet despite three-and-a-half years of debt and banking turmoil, with bailouts totaling more than 400 billion euros, northern euro zone taxpayers have not actually lost a cent.

What is more, governments in Germany, Finland, Austria, the Netherlands and France have saved billions of euros thanks to a sharp fall in how much they pay to raise money in financial markets since their borrowing costs have dropped steeply.

But that has not prevented the image taking root in voters’ minds of hard working northern Europeans putting money on the line to rescue profligate, work-shy southerners, fuelling resentment and undermining Europe’s unity.

In the run up to German elections in September, that resentment is only likely to grow, and Chancellor Angela Merkel, bidding for a third term in office, will have to reaffirm her commitment to protect voters from potential losses.

But the truth remains that German taxpayers, as well as those in Finland, the Netherlands and elsewhere, are no worse off at all, and their finance ministries have racked up savings.

“As an unintentional consequence of the crisis, Finland has benefited enormously,” said Martti Salmi, the head of international and EU affairs at Finland’s ministry of finance.

“We have not lost a cent so far,” he told Reuters. “The same as foGermany very much holds for Finland.”

In fact, German officials are well aware of their stronger financing position, the result of a more than two percentage point fall in borrowing costs, even as politicians continue to lament the risks being piled on German taxpayers.

When giving presentations in Germany, Klaus Regling, the German who heads the euro zone’s permanent bailout fund, often cites two studies that show that Berlin has reaped substantial savings as an unintended consequence of the crisis.

One study, by German insurance giant Allianz, has calculated that Berlin saved 10.2 billion euros in 2010-2012 because of lower borrowing costs, as yields on its 10-year bonds fell from 3.39 percent to 1.18 percent now.

The other study, by Jens Boysen-Hogrefe of the IfW economic institute, suggests that the German federal budget saved 8.6 billion euros in 2011 due to low ECB interest rates and the safe-haven impact of investors putting money into Germany.

Those savings rose to 9.6 billion in 2012 and the safe-haven effect will alone be worth 2 billion in 2013, IfW said.

“If we add up the interest rate advantages gained in the period 2010 to 2012 and those that Germany will benefit from in the years to come, we arrive at cumulative interest relief for the German budget of an estimated 67 billion euros,” Allianz said in a paper published last September.

“(That is) enough to slash around 3 percentage points off Germany’s government debt ratio,” which reaps further saving.

Finland, the Netherlands, Austria and France may not have gained as much as Germany, but have also seen a substantial decline in borrowing costs over the crisis period.

“Northern European countries are making a considerable profit out of these operations and they are not even redistributing these direct and indirect benefits,” said a senior official in Brussels.


The heart of the misconception about taxpayers losses is the fact that in public discourse, the difference between lending and giving has ceased to exist.

And with anti-bailout sentiment so strong in much of northern Europe, there has been no willingness on the part of politicians to correct that misconception. The anti-EU True Finns party in Finland, for example, draws support from the belief that Finns are spending money on southern Europeans.

The situation is quite different. While Finland may be providing lots of guarantees to the eurozone’s bailout funds and has lent money to bailed out countries, the Finnish finance ministry has earned extra money from the crisis.

Last year, the Finnish central bank contributed 227 million euros to the Finnish budget as a result of profits made on the Greek, Spanish and Portuguese government bonds it holds, 40 million euros more than it made in 2011.

This year, the profit should rise to 360 million.


For any euro zone country that has provide bailout assistance to lose money, GreeceIreland,Portugal, Spain or Cyprus would have to default on the loans they have received.

But rather than being close to defaultPortugal and Ireland are near to exiting their bailout programs and pose little risk, while the chance of default Spain has always been minimal and is closely managed in Cyprus.

Greece, which has received 166 billion euros in bailout loans, poses the biggest risk, but even that is changing.

“With every day, the risk that Greece would cost taxpayers anything decreases,” a second EU official said. “It is not doing badly at the moment and there is a possibility it may do better than assumed.”

Apart from the initial bilateral loans to Greece in 2010 which totaled 52.9 billion euros, no euro zone taxpayer money was sent to Greece, or any other country. All the later bailouts were financed on markets via the eurozone bailout fund.

Officials said that even if any of the bailed-out countries were to not pay back some of the money borrowed from euro zone governments, the alternative — a euro zone break-up — would have been a much costlier affair than any bailout losses.

A study commissioned by the German Bertelsmann Foundation showed this week that if Germany were to return to its old Deutschmark, its annual GDP would be 0.5 points lower between 2013 and 2025, resulting in a loss of 1.2 trillion euros over the 13 years – half the size of the German economy in 2012.

“It is possible that we will get out of it without getting our feet wet, or with getting our feet wet only a little bit,” Finland’s Salmi said about the likelihood of a default on any of the bailout loans extended to rescued countries.

“But if we end up forgiving a loan of 1 billion euros to Greece sometime in the next 10 years, that’s nothing compared to what we would have faced if we had a meltdown of the euro zone. It would be completely insignificant compared to that,” he said.

(Additional reporting by Mike Shields in Vienna, Ritsuko Ando in Helsinki and Annika Breidthardt in Berlin; Editing by Luke Baker)




Rodney Atkinson to The Guardian about Germany’s treatment of Greece


2 comments on “(Reuters) Analysis: What taxpayer bailouts? Euro crisis saves Germany money

  1. Germany made over €1bn out of Greek debt crisis

    Published time: 18 Jul, 2017 13:16
    Edited time: 18 Jul, 2017 14:24

    Since the beginning of Greece’s crisis in 2009 Germany’s Finance Ministry has cashed in to the tune of €1.3 billion as a result of its loans to Athens and its debt buying programs reports Euractiv.

    Eurozone members initially agreed to hand any interest back to the Greek central bank as a point of EU solidarity. However, when the second bailout program started in 2015, the pay-back operation was halted. The interest was not mentioned in the German federal budget that year, and therefore the interest was never paid back to Athens.

    Since then Berlin has refused to restart the pay-back program despite Athens’ efforts to satisfy the demands of its creditors.

    According to German daily Suddeutsche Zeitung, Germany’s development bank KfW has received €393 million in interest payments on a loan of €15.2 billion it made to Athens in 2010.

    A state debt buying scheme by the eurozone’s central banks brought the Bundesbank a profit of €952 million between 2010 and 2012. The European Central Bank collected more than €1.1 billion in 2016 in interest payments on the nearly €20 billion-worth of Greek bonds it holds, showed the report.

    “It may be legal how Germany deals with the crisis in Greece. It is not legitimate in the moral sense of solidarity”, explains the speaker for budgetary affairs in the Bundestag for the Green Party, Sven Christian Kindler.

    “The interest gained must finally be paid to Greece. It can not be that (German Finance Minister) Wolfgang Schäuble wants to rehabilitate the German budget with Greek interest,” says the Green’s EU expert in the Bundestag, Manuel Sarrazin.

    Last year Schaeuble told Greece to carry out unpopular reforms if it wants to stay in the eurozone, ruling out debt relief for Athens.

    Eurozone ministers agreed in June to unlock the latest €8.5 billion tranche of Greece’s bailout to help the country avoid a default on its debt repayments of nearly €7.3 billion.

    “Greece has to become competitive to get access to debt markets so it can stand on its own two feet,” Schaeuble said after the agreement, adding “for that Greece has to carry out reforms.”

    To get a new installment of bailout funds, Athens has promised to cut pensions in 2019 and reduce the tax-free threshold in 2020 to produce savings worth two percent of GDP.

    The authorities also agreed to sell coal-fired power plants and coal mines equal to about 40 percent of the capacity of state-run power utility Public Power Corporation.


  2. REVEALED: How the EU bank has made £7.2 BILLION profit from Greece’s financial crisis

    THE European Central Bank (ECB) has made an eye-popping profit of £7.2billion from the Greek debt crisis, it has been revealed.


    PUBLISHED: 08:43, Wed, Oct 11, 2017 | UPDATED: 10:04, Wed, Oct 11, 2017


    The extraordinary figure will enrage cash-strapped Greeks who have lived under crushing austerity measures for seven years.

    And analysts claim the ECB’s involvement in Greece’s bailout has created a shocking conflict of interest.

    Leo Hoffman-Axthelm at Transparency International said: “The ECB expects repayments on its Greek bonds with one hand while approving Greece’s reform progress with the other.

    “The Bank is literally sitting at all sides of the table.”


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