Germany National Debt

The national debt of nations is not something solely an American problem. In this article, we take a look at the Germany national debt issue and how it compares to others.

German Debt

The Germans are, of course, part of the European Union. In fact, one could argue very convincingly that Germany is the dominant country in the Eurozone from at least an economic perspective. Much of this is due to the fact that Germany has a dominant and strong economy that came through the European Great Recession with a minimum of fuss and this means the German national debt is under control.

Debt Level

The gross German national debt is estimated to be roughly 85 percent at the end of 2011. This represents an increase from 65 percent in 2007 before the Great Recession steamrolled Europe and the United States. 65 percent is considered a safe ratio, but 85 percent is moving into unsafe areas. The difference in this case, however, is a good bit of the Germany national debt has come in the form of temporary spending to get through the economic rough spot and in bailing out other countries in the EU. Both of these events will end soon and few see Germany as being in an untenable situation.

Banking Risks

There are two areas that could certainly upset this. Taken in no particular order, the first concern is the state of German banks. German banks have loaned money unwisely to countries such as Greece, which have no hope of paying the loans back. This is why you see Germany stepping up and leading EU efforts to find a solution to the debt problems of the PIIGS in the EU. If the banks fail completely, you could see the Germany national debt explode as the government steps in to bailout the banks to prevent a meltdown. In such a scenario, the debt ratio would go well over 100 percent.

EU Risks

The second risk has to do with the EU itself. The question many are legitimately asking now is whether the European Union can exist as an economic force. The primary problem is that the countries are not economic equals. During rough patches, this leaves relatively strong economies like France and Germany facing serious financing obligations for weaker countries like Greece, Portugal and now even Spain and Italy. If these weaker countries fall apart, the total bailout amount would be huge and Germany would have to pay much of the bill.

The Germany national debt is currently a bit high, but generally considered to be under control. That doesn’t mean there aren’t risks that could come down the road in the near future.

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