EU rescue costs start to threaten Germany itself
Credit default swaps (CDS) measuring risk on German, French and Dutch bonds have surged over recent days, rising significantly above the levels of non-EMU states in Scandinavia.
« Germany cannot keep paying for bail-outs without going bankrupt itself, » said Professor Wilhelm Hankel, of Frankfurt University. « This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings. »
The refrain was picked up this week by German finance minister Wolfgang Schäuble. « We’re not swimming in money, we’re drowning in debts, » he told the Bundestag.
While Germany’s public and private debt is not extreme, it is very high for a country on the cusp of an acute ageing crisis. Adjusted for demographics, Germany is already one of the most indebted nations in the world.
Those at the coal-face of the bond markets are certain Portugal will need a rescue. Spain is in danger as yields on 10-year bonds punch to a post-EMU record of 5.2pc.