According to legend, the bailouts of countries of Europe’s south have been costly for Germany and other northern countries such as Finland, Austria and Holland. Hence their obsession with policies of ‘rigor’ and deficit reduction. The truth is that they have earned tens of billions of euro from the south. Maurizio Ricci shows how.
Someone – possibly Angela Merkel and the President of the Bundesbank, Jens Weidmann – should explain to the Germans that loans are not the same as gifts. And to guarantee a loan is something else again. Furthermore, as the activity of any bank would show, to lend money can also earn you money. In short, the idea that, since the crisis, the taxpayer or Munich or Hamburg has been systematically pick-pocketed by greedy southern debtors is an urban legend. One that has been told not only in Germany. The Anglo-Saxon press habitually defines Germany as paymaster, the official funder of Europe in crisis. But this picture is false.
Over the three and a half years of the European crisis, the German taxpayer has shelled out little. And in any case, less than others. He has not lost a single euro; nor have taxpayers in the other Nordic countries – Finland, Austria, Holland.
In fact, the German taxpayer has earned a princely sum – tens of billions of euros and he will earn more in the future. If they did the sums, the hawks of the North, the Germans or Finns, ought not only cease to complain about the European crisis and the neglectful Mediterranean countries, but they might ask, selfishly, for an encore.
In three and a half years of crisis, the only sum that has actually been disbursed by European taxpayers is 53 billion euros, loaned to Greece in 2010. In absolute terms, Germany has paid more than others, but only because it is the largest country: in relation to GDP, the German contribution – as was noted, long ago, a large bank, Crédit Suisse – is lower than that of Estonia and even Italy.
After the loan to Greece, a further 400 billion euros of European funds were allocated to countries in difficulty. But they were funded by the European rescue fund that sourced its financing from the market, by issuing bonds. It is true that these securities are guaranteed by the stronger European countries, led by Germany. But in order for these guarantees to come into play and produce losses, it is necessary that the countries that have received aid – Greece, Portugal, Ireland, Spain and Cyprus – to declare themselves bankrupt and fail to return the loans. Today, this is a remote hypothesis. Ireland and Portugal are exiting the emergency situation and the aid programmes, and will soon return directly to the markets. Cyprus is tiny, and a bankrupt Spain has always been considered almost impossible. As for Greece, according to Brussels, ‘consolidation’ is well under way.
And the moves by the the ECB to buy bonds, for which in the end Europe’s north, albeit on a pro rata basis, may be asked to cover the losses? Some 200 billion euros of BTPs and Bonos were purchased by the ECB in the second half of 2011 to stem the crisis in Italy and Spain. Well, it turned out to be an investment, with bells and whistles: purchased when yields hit 6-7 per cent, that is, at bargain prices, they can be resold today, now that yields have dropped to 3-4 per cent, at far higher prices.
The ECB does not disclose its profits, but Finland did. “As an unintentional consequence of the crisis, Finland has benefited enormously,” a candid Martti Salmi, the head of international and EU affairs at Finland’s ministry of finance, told Reuters. In 2012, thanks to the profits on Greek, Spanish and Portuguese bonds in its portfolio, the central bank of little Finland has earned €227 million for the country’s Treasury. In 2011, it made 180 million euros. This year it is expected to make 360 million euros. In proportion, the Bundesbank has probably earned a lot more.
But the real gains of the Germans and othern northern European countries more generally have been made eslewhere, through savings on interest payments of their government bonds. On average, investors require two percentage points less for holding Bunds than three years ago. According to the insurance giant Allianz, this has saved Berlin more than 10 billion euros. According to the authoritative IFW, the savings amounted to 8.6 billion euros in 2011 alone, and a further 9.6 billion euros in 2012. And, since many bonds sold have ten-year maturity, the gains will continue: Allianz calculates that the benefit to the German budget will total 67 billion euros.
But this is still small change compared to the true and great gain [for Europe’s north]: the maintenance of the single currency. Faced with rising anti-euro propaganda in the build up to elections, the Bertelsmann Foundation has commissioned a study on the effects of the return to the mark. For exports, the driving force of the German economy, it would be a terrible blow: a much more expensive currency, like the D-Mark, would threaten the competitiveness of German goods. The study estimated that GDP would fall annually by 0.5 per cent, or 100 billion euros a year.
Micromega / La Repubblica May 6, 2013
Translation by Revolting Europe