Negative Interest, Loans, Submarines, and Attack Corvettes

After taking a Holiday hiatus from the blogosphere, I thought I’d jump back in with one of my favorite topics of late — Europe.  Scanning the foreign papers today I came across two interesting articles; both of which centered on Germany.

Story #1:  Earlier today, Germany held a 6-month bond auction of $3.9 Billion Euro ($4.9 Billion).  The auction was so successful, that the yield actually came in negative.  That is, “investors” are paying Germany 0.01% interest for the privilege of owning these bonds!  In that light, the 0.86% yield on a US 5-year doesn’t seem so bad.

Story #2:  Greece is planning on doing some significant defense spending.  In and of itself, that isn’t too surprising.  They’ve long had a territorial dispute with Turkey involving Cyprus and a sometimes-deadly maritime border dispute in the Gulf of Aegean.  What I found interesting was that a large part of the Greek hardware purchase is to be two submarines manufactured in Germany.  So, if I have this right…  Through various funding mechanisms Germany loans money to Greece to keep it from going belly-up.  Then, Greece buys submarines from Germany using the borrowed funds.

You really can’t make this stuff up.

The epilogue to Story #2:  Over Greece’s forecast period of 2011 – 2016, here is a list of other expected military procurements:

  • Fourth-generation fighter jets
  • Maritime patrol aircraft
  • Advanced jet trainers
  • Armored vehicles
  • And my personal favorite… Attack Corvettes!

I don’t know what an Attack Corvette is, but I want one.  Maybe once the Greek bankruptcy is officially declared I can pick up a low mileage, slightly-used AC at a distressed price.  Better get a Carfax, though.