As Germany’s economy speeds ahead of most of Europe, partly driven by a weak euro and the export support it provides, the nation’s budget deficit has more than doubled, thanks to the recent crisis:
According to provisional national accounting results of the Federal Statistical Office (Destatis), net borrowing of general government in the first half of 2010 amounted to EUR 42.8 billion. Hence the deficit in the first half of 2010 was more than twice that of the first half of 2009 (EUR 18.7 billion).
Measured by the gross domestic product at current prices (EUR 1,211.7 billion), a deficit ratio of –3.5% was calculated from net borrowing for the first half of 2010.
The Wall Street Journal highlights how bank bailouts were part of the deficit blow-out:
Those figures include a stark reminder of the cost of bailing out some of the country’s banks after their disastrous losses during the financial crisis: around €900 million of the deficit was due to the assumption of bad debts from Düsseldorf-based WestLB, which are now on the balance sheet of the state-owned bank rescue fund, Soffin.
The deficit is just a reminder that Germany’s economic performance may have come at the cost of its government’s finance’s. It’s not that government finances are anywhere near problematic levels, but expect more of this to come especially as Germany is pressured to support Europe is exchange for the benefits its export sector receives form the Eurozone arrangement and a falling euro. Still, it could easily be a good deal for Germany given how well their economy is performing relative to other Eurozone members.
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