Germany’s post-2009 worry was export demand, not bank losses

Evidence

Those fears seemed justified when, in the fourth quarter of 2008, German exports contributed 8.1 percent of an overall 9.4 percent annualized decline in GDP. By mid-2009, the Bundesbank was forecasting a 6 percent GDP contraction by the end of the year. Surprisingly robust demand in Asia, however, made up for declines in the Euro Area. German exports, however, rapidly rebounded. Industrial orders rose throughout 2009, and by August investor confidence had reached its highest point in three years. Germany, it seemed, had dodged the financial bullets emanating from the United States. — Mark Blyth, Austerity, 156 (#corroborates, via linked claim)

Europe’s largest economy, Germany, saw the first signs of trouble approaching in August 2007 when IKB, a Dusseldorf-based lender, had to be rescued after suffering losses on its US subprime investments. Following this incident, it seemed for a while that German banks had avoided the crisis, until the state had to step in and rescue the Hypo Real Estate bank in 2008 when its loans to Eastern European mortgagers dried up. This sounded the alarm that other, bigger German banks were still exposed to the East through their loans to Austrian banks, which in turn lent that cash, equivalent to over 70 percent of Austrian GDP, to Eastern European mortgagers whose currencies were now rapidly losing value. — Mark Blyth, Austerity, 154 (#qualifies, via linked claim)

Categorization

• XREF: connects to: Germany’s 2008-09 recession was driven almost entirely by collapsing exports — Mark Blyth, Austerity: The History of a Dangerous…, 156; German banks were exposed indirectly through Austrian lending to Eastern Europe — Mark Blyth, Austerity: The History of a Dangerous…, 154; Rising global protectionism choked off German exports after 1929. — Sebastian Doerr et al., Financial Crises and Political…, 50

Broader Connections

• Germany’s 2008-09 recession was driven almost entirely by collapsing exports #corroborates (0.90) — Mark Blyth, Austerity, 156
• German banks were exposed indirectly through Austrian lending to Eastern Europe #qualifies (0.72) — Mark Blyth, Austerity, 154