Returns on Germany’s Foreign Savings: Equity rather than TARGET balances? CEPS Commentary, 27 July 2017

Busse, Mathias and Gros, Daniel. (2017) Returns on Germany’s Foreign Savings: Equity rather than TARGET balances? CEPS Commentary, 27 July 2017. [Policy Paper]

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Abstract

The true nature of Germany’s foreign investment is often misunderstood or misrepresented. This misunderstanding can be illustrated by the following three statements: 1. The net international investment position (NIIP) of Germany is €1.8 trillion. The TARGET1 balance of the Bundesbank currently amounts to €850 billion. Conclusion: the TARGET balance represents close to one-half of the German NIIP, therefore half of the balance position is invested in an asset that yields zero. 2. The NIIP of Germany is €1.8 trillion. German foreign direct investment abroad amounts to €1.9 trillion. Conclusion: all of German savings abroad are invested (wisely?) in equity. 3. The NIIP of Germany is €1.8 trillion. Portfolio debt assets represent around €1.9 trillion. Conclusion: Germany has invested its surpluses only in low-yielding debt instruments

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