Goldman: Germany Is Now On The Hook By €1 Trillion (Or 40% Of GDP)

Tyler Durden's picture

Earmuffs time for our German readers.

Goldman Sachs, in estimating the impact of tomorrow's LTRO, lets one slip, namely the fact that despite popular German expectations that European bailouts occur at the ECB level, and Germany is fairly isolated from what happens in Greece (which as of today no longer stays at the ECB, but shifts right through to the Bundesbank) thereby reducing the risk of runaway debt inflation, the true price to Germany is substantial to quite substantial. €1 trillion to be precise. Which just happens to be 40% of German GDP...

To wit:

The ECB’s second 3-year refinancing operation (LTRO) kicks-off today, with results announced tomorrow at 10:15 GMT. Around EUR200bn is expected to be drawn from (mostly small-medium) banks in the seven countries that have requested loans to be pledged as collateral through the respective national central banks (the number is obtained by applying a 2/3 haircut to a pool of EUR600-700 bn eligible credit claims). The consensus figure for the entire operation is around EUR500bn, similar to the size of the first refinancing. A higher headline number would have positive first order implications for broader markets, indicating that ‘excess liquidity’ is available to Euro area depository institutions. The focus will then shift on where such liquidity will eventually be deployed. Data for January released yesterday showed that credit to the Euro area private sector has stabilized, but not recovered after the sharp decline at the end of last year.


Staying in the Euro area, the vexed issue of the size of the so-called ‘firewalls’ remains unresolved, and will likely come up again at the Euro leaders summit on Thursday and Friday (March 01-02). The debate crystallizes the tension between ‘financial stability’ and ‘moral hazard’ that has characterized the European sovereign and banking crisis right from the start. Calls on Germany and other core states to combine the lending capacity of the EFSF and the ESM and thus provide a bigger protection against tensions in Greece are increasing. But with peripheral spreads in retreat, largely thanks to the ECB’s ‘all-you-can-take’ term funding operations, the fear in some quarters is that of removing incentives for the peripheral sovereigns (and banks) to continue deleveraging. Germany is the country that has pushed the most for PSI in Greece in an attempt to foster future market discipline, but is also the one that has the biggest stake in conditional aid programs to the periphery and seen its ‘target 2 imbalance’ vis-à-vis the EUR periphery reach almost EUR 1trn on the latest count.

So how long before fake German indignation turns real: €1 trillion in sunk PIIGS costs, €2.5 trillion, or 100% of German GDP? €5 trillion?

Or will the perpetually dangled carrot of an insolvent welfare state keep doing to trick to keep the debt slaves in their stupefied trenches in perpetuity, in a state of dazed zombification, punctuated by the occasional showing of Football (either the North Atlantic or European version).

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TruthInSunshine's picture

The underestimation of the year thus far (but it's very early).

Cdad's picture

"Underestimation" is "priced in."

TruthInSunshine's picture

They have to get the underestimation overestimated, though, to produce the critical 'upside' surprise.

€1 Trillion won't cut it. €3 Trillion in losses is probably 'baked in,' and will be announced with great fanfare, party poppers and ticker-tape.
prains's picture

1 TRILLION DOLLARS (evil laugh) (pinky finger to corner of mouth)

cygnetsong's picture

You may be overestimating the underestimation of overestimation, though.

French Frog's picture

That's quite clearly an understatement

BeetleBailey's picture

I'm smart enough to know I don't know that answer.

Nussi34's picture

Will vote for any anti EU anti EUR party including Nazis

LawsofPhysics's picture

Ouch.  Tme for the Germans to march across Europe again?

Cdad's picture

World wide revolution is..........."priced in."

SheepDog-One's picture

Except apparently you can now do whatever you want to people, and they dont mind in the least. Guess it will take complete sudden collapse to make people realize theyve been totaly screwed.

Just think, at one time in this country, all it took was a 1% tax to cause a shooting revolution.

Cdad's picture

Just as all "less than expected" economic data points have been priced into markets, so too has economic collapse been priced in.  Everything is priced in.  Global fascism exported to the world via the world wide criminal syndicate known as Wall Street has saved us all.

john39's picture

yes and later the fascists will chuckle... to save humanity, it was necessary to kill off most of them.

Green Leader's picture

The global depopulation agenda is going on full scale--not as originally planned, but with the activation of a Plan B. In this case, a worldwide cancer epidemic by means of Fukushima radiation and increased chemtrails spraying.

Those guys do have some serious power in this planet.

Hedge accordingly.

HoofHearted's picture

Someone here wrote, "fuck me running" some time ago. I think that about sums all this stuff up as well as possible.

Schmuck Raker's picture

The Germans won't be marching anywhere.

They'll be DANCING (YouTube)

noses's picture

US we own the world anyway Americans would; they've been doing that for decades. The rest of the world learned the lesson and knows that war is even more expensive than honest work.

JPM Hater001's picture

Um, didnt ZH mention something about this...last year?

"in a state of dazed zombification"

Loving the metaphors.

slaughterer's picture

Looks like the Germans will not be getting their tax cuts this year. 

GeneMarchbanks's picture

'Earmuffs time for our German readers.'

Shouldn't that be eyemuffs?

Anygay, German readers are too busy bleeding rectally to read anything much less Goldman's latest.

apberusdisvet's picture

This time, instead of Jews to the concentration camps, it should be banksters; karma is a bitch.

frenchie's picture


isn't that the same character ???

Nussi34's picture

And all Eurocrats & PIFGIS!

tradebot's picture

The Jews are the banksters...don't you know this???

Cdad's picture

I rather think that Germany's liabilities could be raised to 10 trillion Euro's, and the market would immediately reveal that said number was "priced in."

Such is the completely debauched nature of markets...globally.

EZYJET PILOT's picture

1Trillion which is then being funneled back to the banks, I am right with that statement Tyler?

Ceteris paribus's picture

The Germans dont care , just like everyone else , go ahead take whatever you want .

SheepDog-One's picture

Right its all good, we've got 2 fer 1 Hot Pockets at the store. All is well in the land.

TruthInSunshine's picture

Sheeple everywhere sayeth unto their fractional reserve bankster overlords, "help yourself to whatever you want, but please remember to turn the lights off when you leave."

magpie's picture

The time to short bunds is approaching ?

After all, those anti-Japan articles didn't work and Gentlemen don't dump gilts...

chinaboy's picture

Germany is Greece. They may or may not admit it. That is why they have to save Greece.

DogSlime's picture

Where isn't Greece?

Sovreigns tried to absorb bank debt.  Banks just created more debt in response.  Sovreigns must borrow to pay their debt.

Is there anywhere left that is actually solvent?


DutchDude's picture

Yep; Iceland is doing pretty well actually:

The one thing that appeals to me is that the banking sector is now "only" worth 200% GDP. That's about the lowest in the world now i guess lol.

Think i better learn how to speak islandic, then again; education there is pretty good; everybody speaks English.

Wonder how much a piece of land and some sheep will cost me over there... :)

The trend is your friend's picture

whats a trillion amongst good neighbors, right?

trilliontroll's picture

Prost !

A triilion a day keeps the default away!

kurzdump's picture

Too much liquidity, he?

Dr. Engali's picture

It's mighty generous of you Germans to fund the early retirements of the Piigs. And you better not gripe about it because as soon as you do the Piigs will be running photos of Germans wearing swastikas on the front pages of all their papers.Because we all know the sins of the past that we had nothing to do with are never forgotten .So get to work and goose step into line.

noses's picture

The Greek Eloi should know it won't take long for the next set of Morlocks to appear for harvesting them. And then it's time for some nicely roasted piigs souvlaki…

Kevlar Akubra's picture

There once was a chappie called Hitler

Who wished that commitments were littler

He won over the poor

Then started world war

And today it all looks even brittler


_underscore's picture



There once was a leader called Merkel

Who was stuck in a European jerk-circle

They jerked & they jerked

'Til they proved it could work

Now they're jerking all over the sheeple



ONO47's picture

Can you say FACIAL. I'm sorry, that was just wrong.