Interest Benefits from the Debt Crisis to the German Budget: Updated Calculations
In a previous note, IWH researchers have suggested that due to “flight to safety” effects, Germany was able to issue government debt at lower rates than otherwise would have been possible. The total savings was calculated to be around Euro 100 billion or about 3 percent of German GDP. In the new calculation, the counterfactual scenario that allows calculating these savings could be improved so that it reflects exclusively flight to safety effects and not the low interest rate environment more generally that could be attributed to monetary policy and other factors.
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Related Publications
Interest Benefits from the Debt Crisis to the German Budget: Updated Calculations
in: IWH Online, 8, 2015
Abstract
In a recent IWH online note, the IWH suggested that due to “flight to safety” effects, Germany was able to issue government debt at lower rates than otherwise would have been possible. The total savings was calculated to be around Euro 100 billion or about 3 percent of German GDP. This note provides further evidence on the interest savings to the German budget that extend the calculations in two dimensions. Using this refined methodology, we obtain interest savings to the German budget of just under Euro 90 billion.
