Germany’s Sovereign Debt Non-Crisis

Tim Fernholz, writing about Barack Obama’s struggle with the Axis of Austerity, observes that “The divide isn’t, as this The Hill writer inaccurately suggests, because Europeans worry about debt crises while the president worries about politics.”

Quite so. I have to say it’s frustrating that reporters covering this issue and pundits debating it don’t seem to realize that there are actual market measurements of debt risk. If you take a country like Greece with a real sovereign debt problem, you’ll see high interest rates. But how’s Germany’s debt? The answer is it’s great! Take a look at the interest rate being demanded for a ten-year German bond:

germanbund 1

Anyone who thinks Germany is facing a sovereign debt crisis today should have been absolutely freaking out way back in July 2005 when rates were much higher, to say nothing of the great German debt crisis of June 2007 when they were higher still. But of course nobody was doing that. And the fact of the matter is that Germany, like the United States, is having a historically easy time marketing its debt.