From Mark Grant, Author of Out of the Box And Onto Wall Street
Germany: The Final Frontier
“It always looks darkest just before it gets totally black.”
Over the last several weeks I have tried to bring a more accurate picture of the debts of a number of nations to you. There has been no bias and the figures have stood on their own merit. The statistical component of the European Union, Eurostat, is quite clear; they do not count guarantees or contingent liabilities as part of any nation’s debt. We might all note that if Nestle or IBM or General Electric did this they would find their senior executives jailed for Fraud but never mind; this is the methodology of the EU which quite obviously masks the truth. The problem then is not the simple math used to obtain a more accurate debt to GDP ratio but in digging out the various guarantees, contingent liabilities and obligations of any member nation of the European Union. “Time consuming” would be the accurate words because you have to sleuth around like Sherlock Holmes to come up with the data. Yes, it is all there somewhere or another but it is nowhere all together and so must be found.
In the case of all of the countries that I have examined to date it has been on a stand-alone basis; meaning NOT inclusive of their obligations for the EU, the ECB or various other European institutions which would only increase their actual debt to GDP ratios. For the nations examined to date I concentrated on their guarantees; bank guarantees, regional guarantees, derivatives guaranteed by the sovereign, the debts of various institutions with sovereign guarantees and so forth. Each examination has been country specific because each nation has different policies. Yesterday in Boston I met with the very bright folks at Standish Mellon and promised them a more accurate appraisal of not a troubled country but of the leading country in the European Union, Germany, and so I deliver as promised.
Here we find not the usual issues with the periphery nations but obligations and guarantees for the entire European construct. The analysis of Germany, past their stated GDP and their stated debt to GDP ratio is really a study of the EU/ECB themselves to determine the size and the liabilities that are born by their largest economic member so that we can fully assess the financial condition of Germany and not blindly accept what is officially put out in the Press.
German Gross Domestic Product (GDP): $3.2 trillion
Official German Sovereign Debt: $2.618 trillion
Percentage of Liabilities at the European Union: 27%
Percentage of Liabilities at the ECB 18.94%
Germany’s Percentage of the ECB Debt ($4 trillion) $757.6 billion
German annual cost for the EU budget $46.36 billion
German Guarantees for the Stabilization Funds $280.6 billion
German Guarantees for the Macro Financial Assistance Fund $211.14 billion
German Target-2 Liabilities $656 billion
German Guarantee for the EIB Debt $157.29 billion
Sovereign Guarantee for KFW $588 billion
Total German Sovereign Debt & Guarantees $5.315 trillion
Official debt to GDP Ratio 81.8%
Actual German Debt to GDP Ratio 139.8%
So there you have it; place your bets.