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Germany has emerged as one of the biggest beneficiaries of the European financial crisis.
While other countries in 17-country group that use the euro have battled against investor fears that their economies are buckling under the pressure of too much debt, Germany has managed to save tens of billions of euros thanks to its reputation as a safe place for investments.
The bond markets have demanded that countries such as Italy and Spain pay prohibitively high borrowing costs rates to sell their debt amid worries over their sluggish economies and creaking government finances. Such high interest rates will burden these countries' state coffers for years to come.
Financially healthy Germany, meanwhile, has secured billions of euros in debt at record low — sometimes negative — interest rates.
Germany has long been seen as a safe bet. It is Europe's biggest economy and is the biggest single contributor to eurozone rescue funds, with a gross domestic product of €2.6 trillion ($3.17 trillion). The country's economy has grown steadily in the past two years and, with quarter-on-quarter GDP growth of 0.5 percent, prevented the eurozone a whole from sliding into recession in this year's first quarter.
The country recently sold billions of its 10-year-bonds with an interest rate — or yield — of around 1.5 percent. Last Wednesday, it auctioned €5 billion ($6.1 billion) in two-year treasury notes with an average yield of minus 0.06 percent.
In other words, investors are losing money and paying Germany for the privilege of safely parking their funds in the state coffers. Growing Germany offers the prospect of risk-free debt repayment, and other safe investments don't offer great interest rates — the European Central Bank recently cut the rate on its overnight deposit facility to zero.
"The interest rates are unnaturally low at the moment," Finance Minister Wolfgang Schaeuble acknowledged last month, adding they reflect the amount of "uncertainty in financial markets."
The side-effect, however, is a gain for Schaeuble's coffers.
"Germany saves about €10 billion ($12.5 billion) this year alone thanks to the low interest rates," economist Jens Boysen-Hogrefe of Germany's Kiel Institute for the World Economy told The Associated Press.
Some analysts argue that the eurozone debt crisis has already secured Germany a windfall of about €100 billion ($125 billion) for Germany, giving the government extra leeway for growth-friendly spending or reducing its debt burden while other countries in the eurozone struggle to stay afloat.
Germany's savings from its bond sales are little talked-about because money that is not spent is harder to keep track of. But a look into the government's past financial outlooks gives an idea of the sums Germany is saving: In 2009, the government forecast that it would have to spend €52 billion to service its debt in 2013. Now, it expects that cost to total only €20 billion next year.
Comparing what Germany paid in yields since 2009 with the period from 1999 to 2008 — when it paid much higher interest rates, economist Boysen-Hogrefe estimates the German central government will save some €68 billion through 2022 on the debt it has auctioned off since 2009.
"If there are no major catastrophes stemming from the eurozone crisis, the figure will soon be in the three digit range," he said.
If the debt issued by state governments and municipalities are also added into the equation, Germany's savings through the low interest rates could be about 50 percent higher still, resulting in a figure already well above the threshold of €100 billion through 2022, he added.
By not having to pay higher interest rates on its debt, Germany has been given an opportunity to slash its budget deficit without having to drastically reduce its spending — or having to introduce any of the austerity measures it has recommended other European countries implement. The government expects to have a fully balanced budget by 2016 and aims to start reducing its debt of €2 trillion ($2.5 trillion), about 80 percent of the nation's GDP.
Germany benefits from the eurozone's debt crisis, but it also has to shoulder major risks. If the crisis drastically escalates, with one or possibly several member states abandoning the currency, Germany as the bloc's economic heavyweight could have to inject up to €300 billion in the form of loans and guarantees to weaker European members and the bloc's rescue funds. That would be about equivalent to the central government's budget for one year.
However, should the crisis in the eurozone worsen, Germany's savings are in danger of being seriously eroded. Roland Doehrn, the RWI economic think tank's chief expert on growth and economic cycles, argues that gains from the eurozone's problems should not be viewed in isolation. The first phase of the region's financial crisis — the 2008 financial storm set off by the bankruptcy of U.S. investment bank Lehman Brothers — cost Germany dearly, forcing it to take on more debt to rescue banks and stimulate the economy.
Because Germany's overall debt significantly rose since 2008, he argues, it is not that easy to say how much Germany is exactly saving because of the eurozone crisis alone. As a ballpark figure, however, an interest rate lower by 1 percent on a debt pile of €2 trillion would mean annual savings of about €20 billion, he added.
"If interest rates go up again, that would mean significant additional spending for Germany," he said, noting that such a development could easily unravel the government's hopes to balance its budget by 2016.
Schaeuble, who previously said that Germany's sustainable long-term interest rate on 10-year-bonds should be in the 2 percent range, said he hoped that the country's interest rates would go up again once the eurozone is out of its current turmoil.
"I believe the interest rate level — which practically is a negative interest in real terms — is more the reflection of the financial markets' worries than of stability. That's why I prefer stability (for the eurozone), then we will still have a low interest rate level," he said.
Schaeuble acknowledged that "some of our partners in Europe suffer from the burden of too high interest rates caused by the irritations in financial markets,"
But he insisted that those countries must reform their economies and bring their finances in order to regain market confidence.
"One does not have to apologize that the trust in the Federal Republic of Germany (...) is high in financial markets," he said.
Juergen Baetz can be reached on Twitter at www.twitter.com/jbaetz