Monday, 31 October 2011

Discovery of Accounting Error Means Germany Is US$78 Billion Richer Than Previously Thought

Discovery of Accounting Error Means Germany Is US$78 Billion Richer Than Previously Thought

By: EW News Desk Team   Date: 31 October 2011

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EW News Desk Team
Always on the look out for the latest news to monitor the state of the world economy.
EconomyWatch, News Desk Team
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31 October 2011

Germany received an unexpected bonus to its coffers last Friday after the Finance Ministry discovered an accounting error at the state-owned Hypo Real Estate (HRE) bank, which now means that the country is 55 billion euros (US$78.7 billion) richer than previously thought.

The German government, on its part, acknowledges that such errors should never have happened in the first place, though it is said to have “welcome any reduction in [Germany’s] debt position.”
Despite this however, many German opposition leaders have been quick to criticise the government for its ineptitude in handling the accounts, as well as for the sheer size of the mistake.
[qupte]"This is not a sum that the Swabian housewife hides in a biscuit tin and forgets," said Social Democratic Party leader Thomas Oppermann. "To overlook such a sum is completely irresponsible."
Oppermann added that Finance Minister Wolfgang Schaeuble had to be held accountable for the mistake since “he (Schaueble) is responsible for the bank being managed and supervised in an orderly way, and this clearly was not the case."
According to the Financial Times, the German Finance Minister has already launched an immediate inquiry into how an apparent accounting mistake could have led to such a massive overstatement of the debt burden of a “bad bank” that was handling the problem assts of a nationalised mortgage lender.
The Finance Ministry also tried to downplay incident, claiming that “it is wrong to say that money has been overlooked or found . . . we have not become €55.5bn richer.”
The accounting error became public knowledge after online magazine Stern.de published a report stating that German national debt had been re-adjusted due to a book-keeping error .As a result of the discovery, Europe’s largest economy now expects it ratio of debt to GDP to fall by 2.6 percentage points to 81.1 percent for this year. This though will still fall well short of the European Union's Maastricht requirement, which states the ideal debt to GDP ratio to be at 60 percent.

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