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Fast Fact: Germany paid 5% Interest and Had 0.5% Average Growth between 1996 and 2002

Most recently the Bundesbank critised the ECB decision to reduce Italian yields contained in the OMT program. To put things into perspective:

Germany paid 5% interest for 10 years government bonds between 1996 and 2002.

This at average inflation-adjusted GDP growth rates of 0.5%.

German GDP 1994-2004


But there was no ECB that was buying German bonds during that period, there was nobody that helped to finance the costs of the German reunification except the Germans themselves.

Instead the German government decided to stop deficit spending and to implement austerity in 1997. Germany became the “sick man of Europe” and the German balance sheet recession started.


Year German government gross debt Percent Change
1991 39.537
1992 42.019 6.28 %
1993 45.767 8.92 %
1994 47.968 4.81 %
1995 55.597 15.90 %
1996 58.467 5.16 %
1997 59.754 2.20 %
1998 60.491 1.23 %
1999 61.257 1.27 %
2000 60.182 -1.75 %
2001 59.142 -1.73 %
2002 60.748 2.72 %
2003 64.426 6.05 %
2004 66.204 2.76 %
2005 68.514 3.49 %   (source)

Thanks to generous deficit spending of the rest of Europe, cheap labor from Eastern Germany, low or no wage and increased productivity helped so that the German current account surplus exploded.

German Current Account till 2008

German Current Account Surplus After 2000 Explodes - Click to enlarge

One can understand that the Bundesbank declares ‘war’ on Mario Draghi bond bail-out at Germany’s top court, because the ECB manipulates market prices. According to the Bundesbank a potential euro exit of a debtor nation makes the ECB and behind her Germans reliable.

At the end it was the German reunification that made the euro zone possible, because due to its high costs, Germany was a weak economy under many other weak ones.

Why should the European periphery not be able to repeat the German success story?

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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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