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Europe's Poorest? Look North
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ECB study put out in April 2013 shows household wealth and income in eurozone countries based on 2009-2010 data for 60,000 households throughout the eurozone. The household wealth in southern European countries is higher than that in Germany. The study shows why ordinary Germans oppose bailouts for banks, Greece, and eurozone countries that experienced a boom in the 2000-2010 period, a period in which German workers took small pay raises to improve German competitiveness. Germans also see Portugal and Ireland in a different light compared to Greece, Cyprus, Italy and Spain where real estate speculation, lax accounting, tax evasion and favored treatment of certain groups, has created or aggravated the debt problems. Wealth is defined as total assets, including real estate, vehicles, bank deposits, investments and pensions, minus liabilities for mortgages, credit card debt and loans. By this measure German households had an average of 200,000 euros in wealth, and lower than this in Finland and Netherlands. At the median or midpoint German households had 50,000 euros, the lowest in the eurozone, for Greece the median was 102,000 euros. The impact of home ownership is significant in the report, as home ownership is lower in Germany than in Southern European countries, and mortgage interest is not considered favorably in German tax laws. The decline in value of homes after 2010 is also not reflected. Another indicator for comparitive wellbeing is income, and this is shown in figures released in March 2013 from the European Statistics Agency for GDP per capita. For Germany per capita GDP was 29,000 euros in 2010. The average GDP per capita for the eurozone is about 24,000 euros. By this measure Greece is at 21,000 euros, 24,000 euros for Italy and for Spain. Germany being 18-19% above Spain and Italy. If Germans, Dutch, Finns and Austrians are less well off then the argument favors having the banks, creditors, and including depositors, in a burdensharing arrangement for bailout of troubled eurozone economies.
ECB study in April 2013 using 2009-2010 data showing the median household wealth in Germany at 50,000 euros, lowest in the eurozone
03/03/2010
The median for household wealth in Greece is 102,000 euros.
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This debate puts British prime minister Cameron, and German chancellor Angela Merkel, on one side, with US President Obama, US central bank chairman Bernanke and other leaders on the other side. The blanket Irish guarantee of all Irish bank debt is an example of improper action that could have prevented the need for an Irish bailout, when guaranteeing only retail Irish bank debt would have worked. Merkel has insisted on bondholders sharing in bank losses, and tougher action required for countries receiving bailouts.
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Shifts in German public opinion to bailouts of other European countries
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Deutsche Bank's image in Germany 2008-2015
01/02/2009
Deutsche Bank's image takes a hit in an alleged carbon credit value added tax fraud. Its headquarters in Frankfurt are raided by German police and investigators. Co-CEO Jurgen Fitschen's call to the Governor of Hesse protesting the raid is criticized in Germany as intervening in an ongoing investigation of the bank. Earlier Deutsche Bank's role in the 2008 financial crisis with its participation in the mortgage securities market in the U.S. came under criticism. This also raised the question whether a change in management with the two new co-CEO's made in mid 2012 has changed the culture at the bank.
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German reaction to the debt crisis in Greece, Portugal, Spain and Italy.
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Germany said to be turning nationalistic in this crisis, seeing Germany's economic successes as its own, and not accepting the advantage of export markets in Europe in strengthening Germany's economic position.
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A German view of bailouts by the president of the Ifo Institute in Munich
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Hans-Werner Sinn of the Ifo Institute says Germany has already done its part, and socialization of losses in Europe- through eurobonds or other measures- is dangerous. Something he says, even the U.S. avoided doing in the 1830's and 1840's when it let 8 states go bankrupt.
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The views of the IMF, ECB and the governments of Germany, Netherlands, Baltics, on the bailout in Cyprus
03/25/2013
The IMF pushed for investors to share the cost of a bailout in Cyprus. The Netherlands finance minister who heads the EU finance ministers group pushed strongly for this. The president of Estonia was quite vocal about the fact that Russian oligarchs were using Cyprus as a tax haven. He said the EU could not agree to "money laundering."
Grouped Articles
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Cyprus Heads Toward Exit, Leaving Greece as Last Bailout Member
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The logjam between the bondholders (mostly French and German banks) and the German government- 2010-2012
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The roots of the Eurozone financial crisis go back to the issue of who should pay for the excess lending of French and German banks. Will it be the German taxpayer or the banks that took excessive risks? German financial experts, the German government and parliament, German public opinion, are all adamantly opposed to letting the banks off without sharing at least 50% of the costs of a bailout. A review done by the European Commission in coordination witht he IMF and the ECB, shows that from May 2010 (the date for the inception of the aid program to Greece) to September 2011, $52 billion of the $91 billion loaned to Greece went to pay bondholders for bonds that came due. The July 2011 EU agreement for Greece called for 21% of losses to be allocated to the bondholders. The German government is pushing for 50% and German parlamentary leaders in Merkel's party are balking at anything less.
Grouped Articles
Wall Street Journal 07/13/2011
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Most Greek bailout money has gone to pay off bondholders - The Washington Post
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Commerzbank and the German government's bailout funds
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Grouped Articles
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Red Flags said to Go Unheeded at Chase
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German Bundesbank president Jens Weidmann and views on the ECB's role in the eurozone crisis
04/19/2010
Jens Weidmann is the new president of the German central bank. Weidman sees two views colliding on how to respond to the eurozone crisis. He expresses the view of the Bundesbank about opposition to sovereign bond purchases by the European Central Bank to ease high bond yields for Spain and Italy. This is considered as overstepping the ECB's manadate for price stability. Weidmann is the German member of the ECB's Governing Council.
Grouped Articles
German Court to Weigh Bond Buying by E.C.B.
New York Times 06/10/2013
Weber Sees Greece Needing More Aid
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Germany's Bundesbank Gets a New Inflation-Fighter
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Leaders Grow Further Apart on Solutions
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Greece's Path Back (10)- Germany's and chancellor Merkel's view of the euro and the changes needed
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Linked Articles
Wall Street Journal 04/10/2013
Merkel's Defense of Euro Forged in East Germany
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