IWH Study Confirms Germany’s Gain In Greek Crisis

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IWH

Greece could not meet two key payments to the IMF in June and July.  A deal on a bridging loan was worked out by EU leaders to bailout Greece.  Greece sought its first EU-IMF bridging loan in 2010 and Germany provided funding over the past five years (€90bn so far) either directly or through the IMF or the European Stability Mechanism.  The terms of the third bailout have to be reached by 20 August when Greece has to make next debt repayment to the European Central Bank.

Chancellor Angela Merkel’s spokesman Steffen Seibert said Germany is cautious and is keen for Greece to sign up to credible pension reforms and privatisation plans while the Athens government is looking for urgent funding.  Greek officials are confident of reaching an agreement prompting shares in Athens to jump more than 2%.

Any deal will have to be ratified by German MPs, many of whom object to lending more to the Greeks.  However, the study by Halle Institute for Economic Research said Germany had made interest savings of more than 3% of GDP between 2010 and 2015 and much of that was down to the Greek debt crisis.  The IWH study also says a spike in the Greek debt crisis, makes German government bond yields fall.  Whenever the news looked better, Germany’s bond yields increased.  It has saved the German government some €100bn (£70bn; $109bn) in lower borrowing costs because investors have sought safety in German bonds; a study has found.

Even if the situation stabilizes suddenly, Germany is still expected to profit, the IWH argues, because medium- and long-term bonds issued in recent years have many more years for maturing.  Even if Greece defaults on all its debt, Germany would still benefit, says the German IWH institute.

So, it’s win-win situation for Germany.

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