Sometimes things go missing. You search high and low and if you are lucky enough to find them again then you can be pretty happy.
Germany though has just found something that it didn’t even know was missing.
It’s not as though it’s simply some keys that have dropped down the back of the sofa. No, Germany has just found €55 billion.
This is a pretty significant amount and the “find” came about due to spotting an accounting error.
In October last year, FMS Wertmanagement was created when toxic loans and securities with a face value of nearly €175 billion were transferred to it from HRE bank which was nationalised in 2009.
In other words, a so called “bad bank” was created out of the insolvent parts of HRE bank whereby the bad parts (the toxic debts) of the HRE bank were moved to a separate bank (FMS Wertmanagement).
Moving the toxic debt to the “bad bank” meant that what stayed in the nationalised HRE bank was non toxic and the nationalised HRE bank became solvent. This would in thoery help ensure that HRE bank would make a full recovery.
The German Finance Ministry today announced that there had been a double booking of debt and that staff had inadvertently subtracted funds when they should have added them.
The end result is that the reversal of this accounting error means that German debt, as a percentage of GDP reduces from 83.7% to 81.1% – i.e. debt has fallen by 2.6 percentage points.
So, in summary some good news for the German economy.
I should also mention that if the person that made the initial accounting error is by any chance reading this then we do run a wide variety of training programmes including our introduction to finance range of courses…