German firms now pay banks to park funds
Fin24

German firms now pay banks to park funds

2014-10-06 14:49

The Hague - Nowadays, German firms have to pay banks to stash money in current accounts, according to reports in the German media.

The authoritative Frankfurter Allgemeine Zeitung reports that the lowering of interest by the European Central Bank (ECB) is responsible for this uncommon situation. The ECB lowered interest rates on September 4 from 0.15% to 0.05%. This means that companies have to pay an interest of 0.2% to keep money in current accounts.

This does not apply to private people, although nobody gets worthwile interest rates any more by keeping money in a current account. The European inflation rate is at an all-time low (in several countries under 1%).

In one country - Belgium - deflation of 0.12% for September was reported a few days ago. The ECB’s lowering of interest rates is a desperate measure to prevent the European economy from crashing to a total halt.

The other side of the coin is that some institutions, like insurers or pension funds, are affected negatively. This means that the public have to pay more in order to keep these institutions solvent.

One example cited by the newspaper is Horbach, a big company specialising in selling building materials. This company likes to keep about €460m in its current account for short-term investments when the situation warrants it. This now causes problems for Horbach.

According to the financial daily Handelsblatt, other companies negatively affected include Lufthansa airline and the energy company Eon.

When the conservative daily Die Welt predicted the present situation in June, it dramatically declared that this would mean “the end of capitalism”.

“Positive interest – in addition to the money itself – is the heart of capitalism, which drives growth and advancement," the newspaper wrote.

 - Fin24