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Greek situation

Home/Questions and Answers/Greek situation

Is Germany profiting from the crisis in Greece?

92 views November 13, 2018 November 21, 2018 cfroagents 0

I don’t think so. In the run-up to the crisis, the cost of labour (production) in Germany was lower than the one in Greece. As a consequence, the productivity of Greece fell a bit. So in that sense, in the run up to the crisis, yes, Germany benefited. It is true that German bonds are considered a more safe investment. However, there are many people that want to take more risk and potentially see a much higher return, these investors have invested in Greek bonds. They knew they could get cheap money from the ECB and then they used this money to invest in the risky Greek bonds. But, after the crisis, I don’t think it’s in Germany’s interest for Greece to remain weak, largely from a political perspective, because this means that anti-establishment parties become rooted in Greece and these are more likely to encourage the exit from the Eurozone.

Answered by: a German Bank Official

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