Flawed Role Model: Germany’s Finances Not as Sound as Believed - Der Spiegel
The German government likes to pride itself on its solid finances and claim the country is a safe haven for investors. But Germany’s budget management is not nearly as exemplary as it would have people believe, and the national debt is way over the EU’s limit. In some respects, Italy’s finances are in much better shape.
When it comes to fiscal stability, frugality and responsible economic management, German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble have only one role model: themselves.
The chancellor praises herself and her team for having “a clear compass for reducing debt,” and insists: “Getting our finances in order is good for our country.”
Her finance minister, a member of Merkel’s conservative Christian Democrats, is no less effusive. Germany, says Schäuble, is a “safe haven” for capital from around the world, because “the entire world has great confidence in both the performance and soundness of the fiscal policies of the Federal Republic of Germany.”
Developments in the financial markets seem to bear him out. Last week, the suspicions of international investors reached the stable core of the euro zone. Investors embarked on a massive selloff of securities issued by supposedly model countries like Finland and Austria and sought refuge in German government bonds.
Role Model Position at Risk
But it is debatable how much longer Germany can be seen as a refuge of stability and security. In reality, German government finances are not nearly in as good shape as the chancellor and the finance minister would have us believe. The way that certain important indices are developing suggests that Germany may not retain its position as a role model in the long term. Government debt as a percentage of GDP is already at more than 80 percent, which compared to other European Union countries is by no means exemplary, but in fact average at best.