Germany benefits from Greek crisis

In its study the Halle-based Leibniz institute for economic research created a fictitious “normal” situation to establish what German interest rates would have been. The increased demand led to interest rates on German debt issues falling.

German think tank IWH says Berlin saved more than €100bn (£70bn, $110bn) – or over 3% of its gross domestic product – in interest payments between 2010 and 2015.

Government bonds in other countries – including France, the United States and the Netherlands – have also benefited in the same way from the crisis, the report suggested, but on a smaller scale.

“The savings more than offset the costs of the crisis for Germany, even if Greece fails to repay all of the debt it owes to the country”, IWH said.

German lawmakers are likely to the Greek debt disaster as a legal responsibility to their residents’ personal pocketbooks. As frightened bond buyers have fled Greece and different troubled economies since 2010, they’ve piled closely into German debt, which is seen as comparatively protected. As Greece has appealed for debt aid within the type of principal writedowns or restructuring, hardline officers like German Finance Minister Wolfgang Schäuble have argued that such a transfer would come on the expense of German taxpayers.

While low rates help the government cut interest on the national debt, they also mean lower income for savers, Ifo economic institute President Hans-Werner Sinn said in an e-mailed comment in response to the IWH report.

Greece and its creditors – the European Central Bank, the worldwide Monetary Fund and the European Stability Mechanism – are working on the draft of a crucial new bailout of up to 86 billion euros ($94 billion) in exchange for further reforms. Prime Minister Alexis Tsipras and his left-wing authorities have made main political concessions in an effort to safe the brand new loans after months of financial turmoil. “If Greece does pay or pays at least in part, the savings are substantial”.