Now it\’s Germany going bust:
Jean-Claude Juncker, Eurogroup chief, fueled the fire by warning that Germany is no longer a sound credit with debt of 82pc of GDP. \”I think the level of German debt is worrying. Germany has higher debts than Spain,\” he said.
Germany\’s exposure to the crisis is already huge, and the strains can only get worse as the eurozone tips back into recession. The Bundesbank is so far liable for €465bn in \”Target2\” payments to the central banks of Club Med and Ireland for bank support. Hans Werner Sinn from the IFO Institute said this is a form of back-door eurobonds that leaves German taxpayers on the hook. \”The current system is dangerous. It is prone to a gigantic build-up of external debts,\” he said.
The Bundesbank is final guarantor behind €180bn in bond purchases by the European Central Bank, a figure still rising fast as the ECB buys Italian and Spanish debt.
On top of this, Germany is liable for its €211bn share of Europe\’s EFSF rescue fund, as well the original Greek loan package. If the eurozone broke up in acrimony with a clutch of sovereign defaults and a 1930s-style slump – already a \”non-negligeable risk\” – the losses could push German debt towards 120pc of GDP.
OK, there\’s still a fair few ifs and maybes in there. But it\’s not looking good is it?