Germany’s top debt manager will almost certainly be FDP leader Christian Lindner. As an involuntary welcome gift to the designated finance minister, an advisory group of the house is now fundamentally criticizing the debt management of the Federal Republic. The so-called scientific advisory board of the Ministry of Finance calls for the maturities of the national debt to be extended. The state should therefore secure repayment dates in times of extremely low interest rates that are later in the future.
Real estate buyers also know a financial advantage behind this from their bank loans: the slower you have to repay the debt, the more feasible it becomes. And above all, in contrast to many homebuyers, the Federal Republic of Germany has more than good creditworthiness: it takes loans via so-called government bonds on, she often doesn’t even have to pay interest, she even gets money.
The scientific advisory board is professionally broad and cleverly composed, the advisory board is not a body for courtesy reports. The paper on the national debt was scientifically discussed for a long time and is therefore not a short-term reaction to the results of the coalition negotiations. The economists argue that later repayment periods protect the federal budget from interest rates rising again at some point.
George Soros had even advocated infinite running times
Germany’s debt management has moved away from the international trend. On average across the OECD, the maturities of government bonds are getting longer, from around five years in 2003 to more than eight years recently. In the Corona crisis, the Federal Republic even opted for the opposite path, although in the fight against the pandemic a particularly large number of billions of debts are taken on – but the proportion of government bonds with a term of ten years and longer has fallen significantly.
“The advisory board advocates a moderate extension of the terms of the national debt,” says the paper. The committee does not go as far as financial grand seigneur George Soros, who not only wanted to go a little further with the terms of the national debt in the Corona crisis, but infinitely far: he had for bonds pleaded for an unlimited period, which would therefore never have to (but could) be paid back. This sounds strange from the perspective of a homebuyer, but it is possible in the financial markets because, from a financial mathematical point of view, states, unlike homebuyers, do not die after a few decades.
The Advisory Board also points out a risk in the state’s accounting. German government bonds are currently so popular on the financial markets that the federal government often receives a kind of bonus payment, so-called premium income, when the bonds are auctioned. However, these are booked in such a way that the cash position appears surprisingly better, which makes budget planning more unreliable. And the effect can be reversed if interest rates rise again: Then the treasury suddenly appears emptier than originally planned. The Advisory Board therefore proposes reforming the handling of these bonus payments. The problem is technical, but not a small one: in 2020 it was about twelve billion euros.