While it was certainly no secret that Germany, the EMU’s bastion of prudent finances and sound money, was no fan of the fiscally irresponsible eurozone periphery going into 2015, the extent to which Berlin’s relationship with Athens and the Greek people deteriorated over the course of six months of bailout negotiations was truly remarkable.
To let former Greek Finance Minister Yanis Varoufakis tell it, the German finance ministry was determined to push Greece from the eurozone from the time Syriza swept to power in January on an anti-austerity platform, and while it was clear from the beginning that the ideological divide between Varoufakis and German FinMin Wolfgang Schaueble was likely unbridgeable, the relationship between the two eventually transformed Schaeuble into a symbol of repression for the Greek populace.
Tensions between the Greeks and the Germans eventually reached a boiling point when, in a farcical effort to extract war reparations Athens claims it’s still owed from World War II, Greece began showing [9] looped video footage of the Nazi occupation to commuters on public transportation.
Germany would ultimately have the last laugh after Schaeuble and Angela Merkel extracted a humiliating set of concessions from Greek PM Alexis Tsipras and while it’s true that the German taxpayer is on the hook yet again for a Greek bailout, a new report argues that for all the sharp-tongued criticism and Grexit threats, it is none other than Germany that has benefited the most from the ongoing crisis in Greece. Here’s AFP [10]:
Germany, which has taken a tough line on Greece, has profited from the country's crisis to the tune of 100 billion euros ($109 billion), according to a new study Monday.
The sum represents money Germany saved through lower interest payments on funds the government borrowed amid investor "flights to safety", the study said.
"These savings exceed the costs of the crisis -- even if Greece were to default on its entire debt," said the private, non-profit Leibniz Institute of Economic Research in its paper. "Germany has clearly benefited from the Greek crisis."
When investors are faced with turmoil, they typically seek a safe haven for their money, and export champion Germany "disproportionately benefited" from that during the debt crisis, it said.
"Every time financial markets faced negative news on Greece in recent years, interest rates on German government bonds fell, and every time there was good news, they rose."
Germany, the eurozone's effective paymaster, has demanded fiscal discipline and tough economic reforms in Greece in return for consenting to new aid from international creditors.
Finance Minister Wolfgang Schaeuble has opposed a Greek debt write-down while pointing to his own government's balanced budget.
The institute, however, argued that the balanced budget was possible in large part only because of Germany's interest savings amid the Greek debt crisis.
The estimated 100 billion euros Germany had saved since 2010 accounted for over three percent of GDP, said the institute based in the eastern city of Halle.
Germany's share of the international rescue packages for Greece, including a new loan being negotiated now, came to around 90 billion euros, said the institute.
"Even if Greece doesn't pay back a single cent, the German public purse has benefited financially from the crisis," said the institute.
Could this be the ultimate irony in the entire Greek tragicomedy: that after all is said and done, the crisis-wracked perihpery's pain was indeed Germany's gain, as Berlin's borrowing costs plummeted, allowing the country to balance its budget for the first time in four and a half decades while the eurozone's struggling debtor states were forced to live hand-to-mouth? Have a look at the following chart and decide for yourself:
[11]
