A Sovereign Wealth Fund to Lift Germany’s Curse of Excess Savings

CEPS Policy Briefs, No. 280, August 28, 2012

7 Pages Posted: 15 Sep 2012

See all articles by Daniel Gros

Daniel Gros

Centre for European Policy Studies, Brussels; CESifo (Center for Economic Studies and Ifo Institute)

Thomas Mayer

Centre for European Policy Studies (CEPS); Deutsche Bank, London

Date Written: August 28, 2012

Abstract

As an alternative to the present system of intermediation of the German savings surplus, this paper suggests that the risk-adjusted rate of return could be improved by creating a sovereign wealth fund for Germany (designated DESWF), which could invest excess German savings globally. Such a DESWF would offer German savers a secure vehicle paying a guaranteed positive minimum real interest rate, with a top-up when real investment returns allowed. The vehicle would invest the funds in a portfolio that is highly diversified by geography and asset classes. Positive real returns can be expected in the long run based on positive real global growth. Since, in this case, a significant amount of funds would flow outside the euro area, the euro would depreciate, which would help crisis countries presently struggling to revive growth through exports and to close their external deficits so as to recoup their international credit-worthiness. Target imbalances would gradually disappear and German claims abroad would move from nominal claims on the ECB to diversified real and nominal claims on various private and public foreign entities in a variety of asset classes.

Keywords: sovereign wealth fund, Germany, excess savings, ECB, DESWF, funds, crisis

Suggested Citation

Gros, Daniel and Mayer, Thomas, A Sovereign Wealth Fund to Lift Germany’s Curse of Excess Savings (August 28, 2012). CEPS Policy Briefs, No. 280, August 28, 2012, Available at SSRN: https://ssrn.com/abstract=2145918

Daniel Gros (Contact Author)

Centre for European Policy Studies, Brussels ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Thomas Mayer

Centre for European Policy Studies (CEPS) ( email )

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Deutsche Bank, London ( email )

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