Getty Images German Chancellor Angela Merkel

The official line on today's failed German bond auction is that it "reflects the deep mistrust [of the] euro project rather than a mistrust to German government bonds," Danske's chief analyst Jens Peter Sorensen told the Wall Street Journal.

I'm always wary, however, when people claim to somehow know what causes market events.

There is reason to believe that investors could be growing worried about Germany's financial health. The country has a very high debt to GDP ratio. And just like every other euro-zone country, it does not issue debt in its own sovereign currency. This means that it can be subject to funding shortfalls, unlike the United States or Japan.

Tuesday, Der Spiegel published an article titled "Germany Finances Not as Sound as Believed." Yikes! (Hat Tip: The Big Picture.)

From Der Spiegel:

But it is debatable how much longer Germany can be seen as a refuge of stability and security. In reality, German government finances are not nearly in as good shape as the chancellor and the finance minister would have us believe. The way that certain important indices are developing suggests that Germany may not retain its position as a role model in the long term. Government debt as a percentage of GDP is already at more than 80 percent, which compared to other European Union countries is by no means exemplary, but in fact average at best.

When it comes to their debt-to-GDP ratios, even ailing countries like Spain are in better shape, with values significantly lower than 80 percent. Critics, irritated by [Chancellor Angela] Merkel's and [Finance Minister Wolfgang] Schäuble's overly confident rhetoric, are beginning to find fault with Europe's self-proclaimed model country. "I think that the level of German debt is troubling," says Luxembourg Prime Minister Jean-Claude Juncker, whose country has a debt-to-GDP ratio of just 20 percent.

The German news magazine goes on to describe a "noticeable reduction in austerity" and a "mood of generosity" taking hold of important German political parties. Spending is rising, which could make it far more difficult for Germany to meet its Maastricht-mandated goal of reducing the debt to 60 percent of GDP. German government budget projections depend on a strong economy, something the deterioration of German trading partners in the euro zone makes highly doubtful.

The failed auction could pose serious problems for Germany. If it is forced to sell bonds at higher interest rates, its budget problems grow.

But if those interest rates were to increase by an average of only 1 percent, the German government budget would face an additional annual burden of €20 billion in the medium term.

Maybe the buyers of the bund will return in the next auction. Maybe this was just a glitch. Or maybe Germany's reputation as a safe haven is starting to crack.

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