BERLIN, March 18 (Reuters) - Germany will save at least 15 billion euros over the coming decade thanks to its “safe haven” status among investors fleeing the euro zone debt crisis, which has driven down Berlin’s borrowing costs, a leading German institute said on Monday.
Germany’s rock-bottom interest rates, which are helping the government to cut its own debt and achieve a balanced budget, stand in sharp contrast to euro zone peers such as Greece and Portugal which remain locked outside global financial markets.
The findings of the independent Kiel Institute for the Economy (IfW) coincide with an upward tick in borrowing costs for struggling euro zone states, after a relatively subdued few months, due to inconclusive elections in Italy.
A controversial bailout for Cyprus over the weekend that includes a levy on that country’s bank deposits has also rattled investors, increasing the allure of German debt and adding to upward pressure on that of euro zone periphery states.
In 2013 alone the “safe haven effect” will net savings for the federal government of around two billion euros, according to IfW expert Jens Boysen-Hogrefe.
Investors have flocked into German debt especially from 2011, the IfW study showed, pushing yields below rates set by the European Central Bank.
The study could increase calls from Germany’s euro zone peers to do more to boost its domestic demand. Chancellor Angela Merkel’s government has encouraged employers to grant higher wage increases but resisted pressure to cut taxes or boost spending, saying its priority must be to cut the country’s debt.
Last week, the government announced net new borrowing would sink to 6.4 billion euros in 2014, its lowest level in four decades, and that its structural deficit would be eliminated.
It also said Germany would take on no new debt in 2015 and would have a budget surplus of 5 billion euros in 2016.
Surging tax revenues - the result of strong growth and low unemployment in Europe’s largest economy - have also contributed to Germany’s healthy budgetary situation.