Private individuals can only dream of this: Earning money when you run into debt. This year, however, the federal government again earned billions in debt, thanks to negative interest rates. When issuing federal securities to finance the budget, including special funds, “payments totaling around 5.855 billion euros were received”. This emerges from a reply from State Secretary for Finance Florian Toncar (FDP) to a request from the Bundestag member Christian Görke from the Left Party. “Germany has many problems, but state financing is not one of them,” said Görke. “This year, too, the federal government earned billions in debt.”
Because of the high corona costs, the federal government borrowed the record amount of around 483 billion euros on the financial market in the year ending. That is around a fifth more than in the previous record year of 2020. The average yield on federal securities issued was minus 0.56 percent, explained Toncar. Nevertheless, the auctions were oversubscribed 1.7 times. “Despite negative returns, German bonds go away like hotcakes,” said Görke. “The federal government could even have sold more bonds without any problems.” Görke added that if you do not invest heavily in the face of negative interest rates, you are overexploiting German infrastructure.
In the coalition agreement of the traffic light parties there are projects, but no price tags. How much money should really flow into schools, rails and solar panels cannot be found in it. “In times of negative interest rates and investment backlogs, the reform of the debt brake must be on the agenda immediately,” said the left party’s financial policy spokesman. “It is economic madness because it prevents investment. And it is political madness.”
The new Federal Finance Minister Christian Lindner (FDP) should replace the old debt brake with a rule that allows borrowing to the extent of the investments. For the coming year, the finance agency responsible for debt management plans to issue EUR 410 billion. The federal government is very popular with investors, as its creditworthiness is given the top rating of “AAA” by all major rating agencies and the repayment is therefore considered to be very secure. There is also a huge market for these papers to trade, which is why federal papers enjoy near-cash status for pension funds, asset managers and other investors. In addition, the European Central Bank (ECB) acts on a large scale as a buyer of federal securities. This increases demand, which in turn depresses returns.
The total public debt is almost 2.3 trillion euros
At the same time, the debt of the German state is increasing sharply. At the end of September, federal, state, municipal and social security, including all extra budgets, stood together with a good 2.284 trillion euros in the chalk. That is 5.1 percent or 111.3 billion euros more than at the end of 2020, as the Federal Statistical Office announced on Wednesday. This can be attributed “especially at the federal level, but also in some countries to measures to cope with the corona pandemic”. With the exception of social security, liabilities increased at all levels of government.
The federal government recorded the largest share with an increase of 7.2 percent or 101.4 billion euros to around 1.505 trillion euros. At the end of the third quarter, the federal states were in debt with 645.2 billion euros, which corresponds to an increase of 1.4 percent or 9.2 billion euros in 2020. The highest percentage increases compared to the end of 2020 were seen in Bavaria (+12.4 percent), Saxony (+11.0) and North Rhine-Westphalia (+6.0). “The increase in Bavaria resulted in particular from a higher expenditure requirement for measures to cope with the corona pandemic,” it said.