Germany’s financial links with the rest of the world decreased slightly in 2008, not least as a result of the financial market crisis. Overall, Germany’s external assets declined by just under 1% to €4,952 billion and its external liabilities by 1½% to €4,285 billion. As a result, net foreign assets at the end of 2008 amounted to €668 billion, or approximately 27% of GDP (2007: €634 billion).

The slight rise in the net external asset position is attributable to the fact that liabilities fell somewhat more than assets. With regard to external assets, the increase in claims which accompanied the current account surplus of €165 billion was outweighed by a broad-based market-price-related decline in asset values. The fall in the value of liabilities was due mainly to declining prices on the German equity market.

The cross-border asset position of the monetary financial institutions (excluding the Bundesbank) went up in net terms by €72 billion to €494 billion in 2008. The main reason for this was that the liabilities of the German banking system vis-à-vis non-residents fell by €67 billion on the year, which was essentially due to a decline in loans arising from financial relationships. By contrast, assets remained virtually unchanged, although shifts were observed in the asset position. While portfolio investment decreased, banks expanded their direct investment and their cross-border lending, especially in the longer-term maturity segment. Support measures provided to foreign affiliates also played a role in this.

The external assets and external liabilities of German enterprises and individuals, which also include investment funds (excluding money market funds), decreased by €93 billion (4%) to €2,233 billion and by €126 billion (8%) to €1,454 billion respectively. Here, market-price-related corrections outweighed the transaction-related changes in both cases. On the one hand, German enterprises increased their direct investments and credit claims vis-à-vis foreign enterprises and their deposits with foreign banks. On the other, they reduced their portfolio investment abroad. This decline was driven largely by share price losses on the international equity and bond markets and only to a marginal extent by sales. All in all, the German enterprises and individuals sector was, as in previous years, the largest German net creditor to non-residents at the end of 2008, with net external assets amounting to €779 billion (compared with €746 billion at the end of 2007).

In 2008, the external liabilities of general government rose by €107 billion (just over 14%) to €847 billion. This was due mainly to purchases of Federal bonds by foreign investors (€30 billion) and share price gains for these bonds held by foreign investors (€70 billion). This development also reflects the level of security associated with these assets, which is particularly valued by investors in times of crisis. General government external assets, the majority of which are bank deposits and holdings in international organisations, are traditionally less significant. They decreased by €1 billion to €41 billion in 2008. The net external liabilities of public authorities consequently amounted to €806 billion at the end of last year.

The net external position of the Bundesbank increased by €37 billion to €201 billion in 2008. The reserve assets went up by 7% to €99 billion. This was due to both valuation gains in the case of gold and foreign currency reserves (€5 billion in total) as well as to transaction-related changes in the foreign currency position (€2 billion). In addition, other external assets rose by €45 billion to €132 billion. This was primarily the result of a rise in claims within the large-value payment system TARGET2, which, however, are generally of a transitory nature. On the liabilities side, there was an increase of €14 billion in other liabilities to €30 billion. This was due mainly to foreign-currency transactions made in order to overcome the liquidity difficulties of German credit institutions on the domestic money market.