edition
Ar Es
Al Mayadeen English
  • News
    • Politics
    • Economy
    • Sports
    • Arts&Culture
    • Health
    • Miscellaneous
    • Technology
    • Environment
  • Articles
    • Opinion
    • Analysis
    • Blog
    • Feature
  • Videos
  • Infographs
  • In Pictures
  • • LIVE
News
  • Politics
  • Economy
  • Sports
  • Arts&Culture
  • Health
  • Miscellaneous
  • Technology
  • Environment
Articles
  • Opinion
  • Analysis
  • Blog
  • Feature
Videos
Infographs
In Pictures
  1. Home
  2. News
  3. Europe
  4. Germany’s public debt spending expected to double
Europe

Germany’s public debt spending expected to double

  • By Al Mayadeen English
  • Source: Agencies
  • 16 Jul 2022 11:03

In order to finance government loans, the country will have to spend an additional €14 billion due to inflation.

  • Germany’s public debt spending set to double – media
    Germany’s public debt spending set to double – media

Due to increasing inflation, servicing government loans in 2023 would cost Germany about twice as much as it does now, German media group Redaktionsnetzwerk Deutschland (RND) said on Friday, citing data from the country's finance ministry on next year's budget.

An error in previous governments' inflation forecasts will cause Germany's interest payments on its public debt to rise from €16 billion ($16.09 billion) to nearly €30 billion next year, as the federal government has been issuing bonds linked to the inflation rate in recent years, according to the report. 

Berlin misjudged the risk of inflation increase, and as a result, it is now required to provide far bigger sums to service these bonds, according to the news outlet. 

“According to the documents for the draft budget for 2023, around €7.6 billion must be reserved for the repayment of so-called inflation-linked bonds in the coming year. This is €3 billion euros more than this year and almost €7 billion more than last year when inflation was still low,” RND reports.

Read next: Scholz demolished in 200 days what Germany built in 30 years: magazine

The sum of such indexed government loans is currently around €65 billion, which is a little under 5% of the country's total public debt of €1.5 trillion, according to the German Debt Office. However, the ratio of these loans to interest payments is significantly disproportionate, amounting to approximately 25%.

According to the research, banks, insurance companies, and entities that have made loans to the German government will benefit the most from the situation since they will earn more money in interest payments. However, German taxpayers are unlikely to be thrilled because the interest would be paid with their money.

Read next: German company Uniper faces bankruptcy after Russian gas cut-off

“Betting on infinitely low inflation rates when taking on debt was a mistake that is now becoming very costly for taxpayers,” Dietmar Bartsch, leader of the Left faction of the German Parliament, said, commenting on the situation. He also demanded an investigation into the debt policies of the previous governments.

Nonetheless, despite the high cost of inflation-linked bonds, Germany's government debt expenditure is expected to climb in the future years, according to RND, because interest rates are expected to rise as Europe attempts to combat an economic crisis. The European Central Bank (ECB), for example, is likely to raise interest rates later this month for the first time in 11 years.

Highest inflation rates since 1973

German statistics office Destatis reported another hike in food and energy prices as inflation continues. Europe’s top economy, Germany, has reached 7.9%, the highest level since the 1973 oil crisis.

The surge came as the Ukraine war resulted in the collective-West imposing unprecedented sanction packages on Russia. The sanctions imposed on oil and gas hit Europe the hardest and consequently impacted inflation rates the most since late February said Destatis.

The agencies also pointed out that “another factor with an upward effect on prices” is the Covid-19 pandemic and all the supply chain interruptions it had caused throughout a period of two years. 

  • inflation
  • Germany
  • European Union

Trending Now

All
Deutsche Bank CEO Christian Sewing

Germany can no longer avert economic recession - Deutsche Bank CEO

Most Read

US unprepared for potential war with China: Study

US unprepared for potential war with China: Study

  • US & Canada
  • 23 Jan
Is this Western war on Russia simply stupidity?

Is this Western war on Russia simply stupidity?

  • Opinion
  • 22 Jan
Twitter headquarters is shown in San Francisco on Nov. 4, 2022 (AP Photo/Jeff Chiu, File)

FBI created dashboard to mislabel Twitter users as Russian bots

  • US & Canada
  • 27 Jan
The Russian-manufactured Marker 2 tank-striker (Military Review)

Russia reveals Marker 2 combat robots

  • Europe
  • 26 Jan

Read this

All
Dozens of thousands rally against Netanyahu in "Tel Aviv" for the fourth consecutive week
Palestine

Tens of thousands rally against Netanyahu in "Tel Aviv": Israeli Media

  • 28 Jan
Kiev aims securing  missiles to strike Crimea: Zelensky's advisor
Politics

Kiev eyes securing missiles to strike Crimea: Zelensky's advisor

  • 28 Jan
A man on a bicycle passes the headquarters of Germany's biggest arms manufacturer Rheinmetall AG in Duesseldorf, Germany, Monday, Jan. 23, 2023 (AP Photo/Martin Meissner)
Europe

Rheinmetall capitalizes on Western insecurities

  • 28 Jan
14 Killed, 24 wounded after Kiev shelled hospital in Lugansk: Russia
Europe

14 Killed, 24 wounded after Kiev shelled hospital in Lugansk: Russia

  • 28 Jan
Al Mayadeen English

Al Mayadeen is an Arab Independent Media Satellite Channel.

All Rights Reserved

  • About Us
  • Contact Us
  • Authors
Android
iOS