Last year, the mountain of debt in Germany grew by 62 billion euros to 2.6 trillion euros. The debt ratio, on the other hand, fell for the second year in a row.
Germany’s mountain of debt continued to grow in 2023. According to calculations by the German Bundesbank, national debt increased by 62 billion euros to 2.62 trillion euros. According to today’s preliminary information, the increase was similar to last year, but significantly weaker than in previous years.
The debt of the federal government, which supported consumers and companies with state caps on gas and electricity prices, grew by 75 billion euros. The federal states’ debts, on the other hand, continued to decrease.
Debt ratio above 60 percent for the fourth year in a row
The debt ratio, i.e. the ratio of debt to nominal gross domestic product (GDP), fell for the second year in a row to 63.7 percent. However, this was the fourth time in a row that Germany exceeded the maximum limit of 60 percent agreed in the European Maastricht Treaties. Germany last fell below the mark in the pre-Corona year of 2019 with a value of 59.6 percent.
The debt rules at EU level essentially stipulate that the debt level of a member state must not exceed 60 percent of economic output. In addition, it is important to keep the national financing deficit – i.e. the difference between the income and expenditure of the public budget, which is primarily covered by loans – below three percent of the gross domestic product (GDP). Due to the Corona crisis and the consequences of the Russian attack on Ukraine, the rules were suspended until 2024.
Debt ratio also fell indirectly due to inflation
Because of the gigantic German national debt, the debt brake was anchored in the Basic Law in 2009. After this, the federal and state governments are no longer allowed to offset their budget deficits by taking out loans.
While there is an absolute ban on indebtedness for the states, the federal government has a small amount of leeway. He is permitted net borrowing of a maximum of 0.35 percent of gross domestic product. However, actual borrowing has been much higher in recent years because the Bundestag took advantage of an exception. The reasons for the “extraordinary emergency situation” were the corona pandemic and the Russian war of aggression against Ukraine.
The Bundesbank attributed the decline in the debt ratio by 2.4 percentage points last year to the increase in nominal gross domestic product, which grew by 6.3 percent, particularly due to high inflation. “This in itself reduced the debt ratio by four percentage points,” explained the central bank. Adjusted for price increases, German economic output shrank last year.