Alarm in Germany after €6bn bond sale flops
Senior members of the chancellor’s Christian Democrats mostly played down the significance of the 10-year bond auction, in which banks ended up buying just €3.64 billion of the €6bn in bonds on offer.
But other politicians were less kind.
Frank Schaeffler, a eurosceptic parliamentarian from the Free Democrats, who rule together with Ms Merkel’s conservatives, said it showed the debt crisis was “burying ever deeper, like a worm” and had now reached Germany.
Carsten Schneider, budget spokesman for the Social Democrats, described it as the first concrete sign that the crisis that started in Greece two years ago and since spread across the eurozone like a virus would not pass Germany by.
“The time has come for the chancellor and finance minister to tell people the truth about the costs and risks that our country now faces,” he told Reuters. “Germany won’t be able to finance itself forever with rock-bottom interest rates.”
After initially painting the crisis as a problem for certain euro countries that irresponsibly ran up their debts, Ms Merkel has changed her rhetoric, warning increasingly about the costs to Germany if the bloc is allowed to fall apart.
Last week she said Europe faced perhaps its “toughest hour” since the Second World War. But for many Germans the crisis has not hit home. The economy remains buoyant, unemployment is at its lowest levels since reunification in 1990 and German firms say they have strong order backlogs.
Germany has been seen as a safe haven by investors since the crisis erupted. But as the crisis has deepened, worries about the costs to Europe’s paymaster have risen.
One analyst called the bond sale, which pushed the euro and stocks lower, a “complete and utter disaster” that did not bode well for Germany and the wider bloc.
“The crisis of confidence is knocking on Germany’s door for the first time,” Gerhard Schick, a finance expert for the Greens said.
The head of the German Debt Agency Carl Heinz Daube blamed “extremely nervous markets” for the poor result.
Members of Ms Merkel’s party blamed the result on the low returns offered — just 2% annually over 10 years. Norbert Barthle, a CDU budget expert, said: “The fact that the interest rate offered is around the inflation rate means no profit for investors. It should be no surprise, because the debt crisis has meant an investor flight away from sovereign debt.”
