The implications of Germany wiping out its public debt

Germ any’s restrictive fiscal policy is gradually wiping out the country’s public debt. This is resulting in: An overall shortfall in the supply of core euro-zone government bonds, leading to very low interest rates on these bonds; The possibility for France to carry out a free-rider policy, as investors who want to invest in core euro-zone bonds have to invest in French bonds due to the disappearance of Germany’s bonds and the small stocks of other bonds; Strong pressure for investors to switch to riskier euro-zone assets (equities, corporate bonds) due to the shortfall in the supply of risk-free assets and their low yields .