German chancellor Angela Merkel’s government has saved €80bn since the start of the financial crisis as a result of declining bond yields, the Institute for the World Economy has said.
Interest payments last year were about €10bn lower than they would have been under a “benchmark scenario” that uses average yields in the decade before the crisis, the institute said in a report.
This year’s savings for the federal government will amount to about €13bn, it said. The period covers 2009-13.
“The decline of bond yields is mainly driven by the low business cycle dynamics in the euro area and the interest rate policy of the European Central Bank,” Jens Boysen-Hogrefe said in his report. Still, a “safe haven effect” will contribute about €3bn to this year’s savings, he said.
Almost half of Germans want the country’s highest court to stop the ECB’s bond-buying programme, a poll in the Handelsblatt newspaper showed yesterday, in a sign voters are wearying of rescue efforts for debt-stricken countries even as Germany benefits.
“The gains from these low interest rates should not be taken as a signal to boost public debt in Germany,” Boysen-Hogrefe said. “These gains are one-time effects rather than a structural improvement of the budget.”
Wolfgang Schäuble, the German finance minister, plans to balance the federal budget next year in “structural” terms.
France, while also benefiting from declining bond yields over time, doesn’t enjoy safe-haven status in the way Germany does, Boysen- Hogrefe said.
The gap between the two countries widened during 2011, when rumours about a break-up of the eurozone became more intense, he said.
“From a European perspective, it might be argued that these remarkable one-time effects are benefits that the German government has experienced due to the debt crisis and that it would be reasonable to spend this amount supporting those countries in the euro area that are most affected by the debt crisis,” he said.
“However, one might also argue that only those benefits should be counted that are due to the ‘safe haven’ effect, since countries like France are benefiting from effects that are due to the ECB’s policy as well.”
The benefit for the federal government, responsible for about half of Germany’s public debt, may grow to over €100bn “in coming years”, Boysen-Hogrefe said. His figures don’t include savings enjoyed by Germany’s 16 states, and municipalities.
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