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Economy
In reply to the discussion: STOCK MARKET WATCH -- Thursday, 24 May 2012 [View all]xchrom
(108,903 posts)12. Hey, Germany: You Got a Bailout, Too
http://www.bloomberg.com/news/2012-05-23/merkel-should-know-her-country-has-been-bailed-out-too.html
In the millions of words written about Europes debt crisis, Germany is typically cast as the responsible adult and Greece as the profligate child. Prudent Germany, the narrative goes, is loath to bail out freeloading Greece, which borrowed more than it could afford and now must suffer the consequences.
Would it surprise you to know that Europes taxpayers have provided as much financial support to Germany as they have to Greece? An examination of European money flows and central-bank balance sheets suggests this is so.
Lets begin with the observation that irresponsible borrowers cant exist without irresponsible lenders. Germanys banks were Greeces enablers. Thanks partly to lax regulation, German banks built up precarious exposures to Europes peripheral countries in the years before the crisis. By December 2009, according to the Bank for International Settlements, German banks had amassed claims of $704 billion on Greece, Ireland, Italy, Portugal and Spain, much more than the German banks aggregate capital. In other words, they lent more than they could afford.
When the European Union and the European Central Bank stepped in to bail out the struggling countries, they made it possible for German banks to bring their money home. As a result, they bailed out Germanys banks as well as the taxpayers who might otherwise have had to support those banks if the loans werent repaid. Unlike much of the aid provided to Greece, the support to Germanys banks happened automatically, as a function of the currency unions structure.
In the millions of words written about Europes debt crisis, Germany is typically cast as the responsible adult and Greece as the profligate child. Prudent Germany, the narrative goes, is loath to bail out freeloading Greece, which borrowed more than it could afford and now must suffer the consequences.
Would it surprise you to know that Europes taxpayers have provided as much financial support to Germany as they have to Greece? An examination of European money flows and central-bank balance sheets suggests this is so.
Lets begin with the observation that irresponsible borrowers cant exist without irresponsible lenders. Germanys banks were Greeces enablers. Thanks partly to lax regulation, German banks built up precarious exposures to Europes peripheral countries in the years before the crisis. By December 2009, according to the Bank for International Settlements, German banks had amassed claims of $704 billion on Greece, Ireland, Italy, Portugal and Spain, much more than the German banks aggregate capital. In other words, they lent more than they could afford.
When the European Union and the European Central Bank stepped in to bail out the struggling countries, they made it possible for German banks to bring their money home. As a result, they bailed out Germanys banks as well as the taxpayers who might otherwise have had to support those banks if the loans werent repaid. Unlike much of the aid provided to Greece, the support to Germanys banks happened automatically, as a function of the currency unions structure.
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S&P is totally schizoid. In the black, in the red, in the black, in the red....
Roland99
May 2012
#35