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Germany fails to honour its part of the Greek bailout deal

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发表于 2017-8-14 12:26:16 | 显示全部楼层 |阅读模式
In this blog – The fiscal role of the KfW – Part 1 – I recounted how the government-owned German development bank, KfW (Kreditanstalt für Wiederaufbau) – interacts with the German Finance Ministry to allow its fiscal balance to move into surplus without the commensurate level of fiscal drag that would normally be associated with that degree of fiscal withdrawal. The intent of the blog was to show how the Germans cleverly use their state-owned development bank to advance ideological positions not available to other states that have either privatised these type of institutions or never created them in the first place. It is ironic given the Germans insistence that countries like Greece privatise everything in sight. Today’s blog returns to the KfW, in part, because new information has emerged where we learn that the Greek crisis has allowed the German Ministry of Finance to run surpluses without melting their economy down. The KfW’s role in that regard is undoubted. It has been a source of bailout funds for Greece, on behalf of the German government, and has been pocketing handy profits ever since. This information shows that the popular claims that German taxpayers are bailing out Greece are clearly false and just political verbiage. Further, despite the understanding that the Member States (bailout partners) would remit any profits made on asset holdings associated with the Greek bailout, the Germans have reneged on that deal, in part, because it has channeled those profits through the KfW, which it claims is at hands length to the government, despite being 100 per cent government-owned.

The KfW started life in 1948 as “part of the Marshall Plan” to help in the reconstruction of Germany.

It borrows in capital markets and all its debt is federal government-guaranteed, which reduces its funding costs relative to a private bank with no such guarantee. It is also exempt from paying company tax.

Taken together, it offers loans to developments at much lower rates than the commercial banks, although it is precluded by law from direct competition with the banks.

The earlier blog on KfW aroused an hysterical response by a blogger who seems to have made it his role, in part, to claim that Modern Monetary Theory (MMT) is plainly wrong and people like me are plainly stupid.

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