Germany owes most to France within the eurozone, study shows

Within the eurozone, Germany is most indebted to France, when all the region’s lenders are ranked by how much they have loaned to Europe’s biggest economy.

Germans owe a combined €205.8bn to the eurozone’s second largest economy, which is regarded by some onlookers as at risk of being sucked into the periphery’s debt maelstrom.

Italy, which has already been engulfed according to measures such as spreads on its sovereign debt, is the bloc’s second largest lender to Germany, with €202.7bn at risk.

These figures are from the BBC, which recently drew together data from the Bank of International Settlements, IMF and World Bank.

Germany still carries a AAA rating on its sovereign creditworthiness – in contrast to many of its eurozone neighbours – but the continuing strength of this was implicitly questioned last week as investors shunned over one third of the €6bn Bunds in a debt auction.

Other foreign creditors within Germany’s €4.2trn of foreign debt pile include the US (owed €174.4bn), the UK (€141.1bn) and Japan (€108.3bn). Other countries such as Spain, Ireland, Greece and Portugal, are owed smaller amounts.

Some managers are questioning how long Germany’s strength as a borrower can continue.

Frank Laufenburg, head of securities at SEB Asset Management in Frankfurt, said: “Everyone believes Bunds are secure, but the Budget numbers are far from being perfect. We question buying Bunds with a negative real yield.”

Creditors have been so enthusiastic during the crisis to lend to Germany, rather than many of its neighbours, that Bund yields this week turned negative, for the first time in living memory.

Matthias Hoppe, vice president and portfolio manager for Franklin Templeton Multi-Asset Strategies in Frankfurt, said: “We currently hold German Bunds, and US Treasuries, but not for their yield, rather for them as ‘safe havens’. This is not a strategic position, it will not be there forever. But certainly it is an asset class with lower volatility, and low correlation to equities.”

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