A SLEEPY COMMUTER town about a half-hour’s drive from the centre of Berlin has called in a long-standing debt to the country’s capital city – a debt the capital might find it just a bit difficult to repay.
The hamlet of Mittenwalde – which last year was recorded as having a population of 8,758 – gave a loan of 400 guilder to Berlin back in 1562, at an interest rate of about 6 per cent.
The loan, it appears, had been forgotten about in the time in between – but was rediscovered by town historian Vera Schmidt when she found the debt certificate stashed in a regional archive.
Assuming Berlin did not make any partial repayments to the loan, the outstanding balance would now stand at about 11,200 guilders – which is roughly equivalent to €112 million in modern currency.
But when you incorporate compound interest and inflation, allowing for how the value of the money would have rocketed in the 450 intervening years, the actual value of the debt reaches not just billions – but trillions.
Schmidt told Reuters that the certificate she had found did not carry a town seal of any sort – but that she was nonetheless certain it was valid.
“In 1893 there was a debate in which the document was examined and the writing was determined to be authentic,” she said, adding that the document had appeared to resurface every fifty years or so, prompting new calls each time for the debt to be repaid.
Current town mayor Uwe Pfeiffer has sent a formal request to Berlin seeking repayment of the loan – or, presumably, at least part of it – and have been in return presented with a ceremonial historical guilder dating from 1539.
Even if that coin – which has now been put on display in the town museum – is considered a part repayment for the debt, there’s still plenty more money to be sought.
The surprise bill would dwarf Germany’s current financing problems – the country is expected to run a budget deficit of some €231 billion this year, or 0.9 per cent of its GDP.
The outstanding Mittenwalde loan, when inflation is factored in, would likely dwarf the reunified Germany’s entire economic output for a year: last year Germany produced around €2.57 trillion worth of goods and services.