Deutschland über alles?

For the Cobden Centre, David Howden writes:

The Maastricht Treaty originally set limits on debts and deficits that European governments could incur – 60% of GDP for the former, and 3% of GDP for the latter. ... While these rules create political stability in the sense that they constrain the fiscal policies of the member countries, they have famously been abandoned. Indeed, Germany – the role model for European financial conservatism – was the first country to break the Maastricht Treaty. It has since become laughable. Ireland ran a budget deficit of over 30% of GDP last year. Several member states run public debt-to-GDP ratios of more than 100%. Only Finland continues to abide by these rules (with the Netherlands coming very close).

BBC News has this story in pictures:


According to the official figures, 'prudent' Germany has long had broadly the same public debt levels as socialist France. Even now, after extreme profligacy, official UK debt hasn't quite caught up with German debt:

Today (thanks to Tom Paine), I discovered this article from Reuters:

A "disastrous" sale of German benchmark bonds sparked fears on Wednesday the debt crisis was beginning to threaten even Berlin, with the Bundesbank forced to dig deep into its pockets to ensure the auction did not fail.

In one of the least successful debt sales by Europe's powerhouse economy since the launch of the single currency, the low returns offered -- just 2 percent annually over 10 years -- deterred investors made uneasy by the escalating cost of the crisis to Germany.

That meant the central bank had to pick up 39 percent of the 6 billion euros of debt Germany had hoped to sell after commercial banks bought just 3.644 billion euros of the issue.

Mountains of debt, bought increasingly by central banks rather than the free market. What's the worst that could happen?