1. A Sovereign Wealth Fund to Lift Germany's Curse of Excess Savings
- Author:
- Daniel Gros and Thomas Mayer
- Publication Date:
- 08-2012
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- For most of the time since the early 1950s, national savings in Germany have tended to exceed national investment, resulting in a current account surplus. Most of these excess savings have been intermediated by the domestic banking system, which has had difficulties investing these German surpluses abroad given that it is prohibited by law from taking any exchange rate risk. This tended to keep the surplus within limits most of the time (less than 1- 2% of GDP). With the advent of the euro, however, German surpluses could become much larger and seem now to have become structurally engrained at 6% of GDP, or over one-quarter of savings. Since the start of the euro crisis, German private savers have repatriated their investments – effectively unloading their exposure onto the public sector as German banks have deposited hundreds of billions of euro at the Bundesbank. These funds are being lent by the ECB to banks in the euro area periphery (at 75 bps) – ensuring effectively a negative real return.
- Topic:
- Economics, International Trade and Finance, Markets, and Sovereign Wealth Funds
- Political Geography:
- Europe and Germany