Global Macro Monitor

This will surprise many.  Der Spiegel reports that Germany’s fiscal management is not as “exemplary” as most perceive.

…Last week, the suspicions of international investors reached the stable core of the euro zone. Investors embarked on a massive selloff of securities issued by supposedly model countries like Finland and Austria and sought refuge in German government bonds.

Role Model Position at Risk
But it is debatable how much longer Germany can be seen as a refuge of stability and security. In reality, German government finances are not nearly in as good shape as the chancellor and the finance minister would have us believe. The way that certain important indices are developing suggests that Germany may not retain its position as a role model in the long term. Government debt as a percentage of GDP is already at more than 80 percent, which compared to other European Union countries is by no means exemplary, but in fact average at best.

When it comes to their debt-to-GDP ratios, even ailing countries like Spain are in better shape, with values significantly lower than 80 percent. Critics, irritated by Merkel’s and Schäuble’s overly confident rhetoric, are beginning to find fault with Europe’s self-proclaimed model country. “I think that the level of German debt is troubling,” says Luxembourg Prime Minister Jean-Claude Juncker, whose country has a debt-to-GDP ratio of just 20 percent.

And this before Germany has recapitalized its banks.  Deutsche Bank’s leverage ratio with total assets 44x  total equity  scares the you know what out of us.   Of course they’ll argue their sovereign holdings are risk-free and do not need capital, they have hidden reserves, blah, blah, blah…  Click here for Simon Johnson’s piece on how Deutsche Bank could become the “transfer bank” of financial contagion to the United States.

 (click here if chart is not observable)