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German bank involvement in Southern EU

April 18, 2011

It’s often annoying to have discussions about the current troubles within the Euro zone with those who are totally convinced that the whole euro thing is disadvantageous for Germany. There are typical assertions like: the Germans were too generous, Portuguese to lazy; the weaker countries need to adopt to the economic standards in the euro zone or otherwise drop out et cetera.

For all the annoyed people, the Economist provides an interesting contribution to the debate.

Bank involvement and contibution to bail-out

According to these data, Germany has an obvious interest in avoiding a Portuguese default. Barry Eichengreen argued that the public in Germany and other countries does not “want to hear that public money is required for bank recapitalization.” So it is a literally cheaper alternative is to provide to deal with the sovereign debt which sounds much better, much more generous, but with similar effects like a bank bailout.

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