Rising bund yields reflect the difficult predicament for German policymakers.
German borrowing costs threatened the highest levels since 2011 and the rise came in part due to reports that energy subsidies are being pondered for German industry.
I wrote at the end of August about signs that Germany’s government had rejected power subsidies and the economic pain that might cause.
On the weekend, Handelsblatt reported that the federal government has found a way to remove a the financing hurdle. The solution could come from the Climate and Transformation Fund
The move is being roundly mocked, and deservedly so, but I don’t think Germany had any other option. Here’s how one person put it.
- Waste €600 billion on unreliable Energy
- Shut down nuclear power
- Spend €30 billion power subsidies to keep industry alive
- Exit coal (2030)
- Probably spend a gazillion € on polish and french power
So far, there is only about €15 billion available so the spending won’t be material but a decision is now said to be coming before month end.
Read the full article here