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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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Tue, 02/28/2012 - 09:56 | 2203439 TruthInSunshine
TruthInSunshine's picture

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

Tue, 02/28/2012 - 10:01 | 2203470 Cdad
Cdad's picture

"Underestimation" is "priced in."

Tue, 02/28/2012 - 10:05 | 2203480 TruthInSunshine
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.
Tue, 02/28/2012 - 10:12 | 2203515 French Frog
French Frog's picture

Gott im Himmel !

Tue, 02/28/2012 - 10:22 | 2203588 prains
prains's picture

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

Tue, 02/28/2012 - 10:15 | 2203536 cygnetsong
cygnetsong's picture

You may be overestimating the underestimation of overestimation, though.

Tue, 02/28/2012 - 10:25 | 2203604 French Frog
French Frog's picture

That's quite clearly an understatement

Tue, 02/28/2012 - 11:25 | 2203870 BeetleBailey
BeetleBailey's picture

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

Tue, 02/28/2012 - 10:44 | 2203691 Nussi34
Nussi34's picture

Will vote for any anti EU anti EUR party including Nazis

Tue, 02/28/2012 - 09:57 | 2203444 LawsofPhysics
LawsofPhysics's picture

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

Tue, 02/28/2012 - 10:00 | 2203464 Cdad
Cdad's picture

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

Tue, 02/28/2012 - 10:13 | 2203525 SheepDog-One
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.

Tue, 02/28/2012 - 10:17 | 2203547 Cdad
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.

Tue, 02/28/2012 - 11:07 | 2203787 john39
john39's picture

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

Tue, 02/28/2012 - 12:39 | 2204251 Green Leader
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.

Tue, 02/28/2012 - 12:40 | 2204252 Green Leader
Green Leader's picture


Tue, 02/28/2012 - 11:44 | 2203962 HoofHearted
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.

Tue, 02/28/2012 - 10:16 | 2203543 disabledvet
disabledvet's picture

You mean "ze Americans...

Tue, 02/28/2012 - 11:26 | 2203884 Schmuck Raker
Schmuck Raker's picture

The Germans won't be marching anywhere.

They'll be DANCING (YouTube)

Tue, 02/28/2012 - 13:36 | 2204484 noses
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.

Tue, 02/28/2012 - 09:58 | 2203445 JPM Hater001
JPM Hater001's picture

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

"in a state of dazed zombification"

Loving the metaphors.

Tue, 02/28/2012 - 09:57 | 2203447 slaughterer
slaughterer's picture

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

Tue, 02/28/2012 - 09:59 | 2203459 Cdad
Cdad's picture

That's "priced in."

Tue, 02/28/2012 - 09:58 | 2203449 GeneMarchbanks
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.

Tue, 02/28/2012 - 09:58 | 2203450 apberusdisvet
apberusdisvet's picture

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

Tue, 02/28/2012 - 10:39 | 2203674 frenchie
frenchie's picture


isn't that the same character ???

Tue, 02/28/2012 - 10:46 | 2203697 Nussi34
Nussi34's picture

And all Eurocrats & PIFGIS!

Tue, 02/28/2012 - 11:14 | 2203807 tradebot
tradebot's picture

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

Tue, 02/28/2012 - 09:58 | 2203453 Cdad
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.

Tue, 02/28/2012 - 10:00 | 2203462 EZYJET PILOT
EZYJET PILOT's picture

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

Tue, 02/28/2012 - 10:00 | 2203465 Ceteris paribus
Ceteris paribus's picture

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

Tue, 02/28/2012 - 10:20 | 2203562 SheepDog-One
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.

Tue, 02/28/2012 - 10:57 | 2203740 TruthInSunshine
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."

Tue, 02/28/2012 - 10:00 | 2203472 magpie
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...

Tue, 02/28/2012 - 10:01 | 2203473 chinaboy
chinaboy's picture

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

Tue, 02/28/2012 - 10:24 | 2203597 DogSlime
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?


Tue, 02/28/2012 - 10:33 | 2203647 DutchDude
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... :)

Tue, 02/28/2012 - 10:02 | 2203477 The trend is yo...
The trend is your friend's picture

whats a trillion amongst good neighbors, right?

Tue, 02/28/2012 - 10:03 | 2203478 orved
orved's picture

How about raincoat time for Merkel: http://www.bbc.co.uk/news/world-europe-17185942


Tue, 02/28/2012 - 10:04 | 2203486 Dr. Engali
Dr. Engali's picture

Beer hall putsch.

Tue, 02/28/2012 - 10:27 | 2203616 trilliontroll
trilliontroll's picture

Prost !

A triilion a day keeps the default away!

Tue, 02/28/2012 - 10:09 | 2203497 kurzdump
kurzdump's picture

Too much liquidity, he?

Tue, 02/28/2012 - 10:12 | 2203481 Dr. Engali
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.

Tue, 02/28/2012 - 10:53 | 2203727 trilliontroll
Tue, 02/28/2012 - 13:43 | 2204505 noses
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…

Tue, 02/28/2012 - 10:04 | 2203484 Moneyswirth
Moneyswirth's picture


Tue, 02/28/2012 - 10:08 | 2203490 Kevlar Akubra
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


Tue, 02/28/2012 - 10:32 | 2203641 Uchtdorf
Uchtdorf's picture


Tue, 02/28/2012 - 11:05 | 2203777 _underscore
_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



Tue, 02/28/2012 - 13:03 | 2204374 ONO47
ONO47's picture

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

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