| With the advent of the euro, exchange rate risk within the Economic and Monetary Union disappeared, and Germans were able to invest their excess savings in the common currency. As a result, German surpluses grew to become ingrained at 6 per cent of gross domestic product, more than a quarter of national savings.
However, German investors’ appetite for eurozone public and private debt has diminished sharply. Investment outside the eurozone is not an alternative, since a large part of German savings are intermediated by banks, which cannot take exchange rate risk...............................................Full Article: Source |