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Germany faces massive national debt

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Photo: DPA
11:55 CEST+02:00
Germany is threatened with the largest debt growth in its history due to a fall in tax revenue because of the recession, newspaper Handelsblatt reported on Thursday.

The German state must borrow €507 billion more before 2013, the financial newspaper calculated, warning that this figure could have particularly serious consequences for young Germans. It will affect public spending on a federal, state and local authority level, and could raise the national debt to €2 trillion.

The new debts will be spread over the next few years, beginning with €112 billion this year and €132 billion in 2010.

The debt increase means that Germany will be violating the EU's Maastricht Treaty for the entire coming legislation period. The Maastricht Treaty dictates that national debt be below 3 percent of the Gross Domestic Product (GDP). In 2010 Germany's debt could rise to as much as 6 percent of the GDP.

If Germany's national debt rose to €2 trillion, the state would end up paying €80 billion a year in interest alone – around one sixth of the current tax revenue.

According to a joint study presented on Tuesday by the Berenberg Bank and the Hamburg Institute of International Economics (HWWI), this debt would hit those born between 1980 and 2000 the hardest.

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The extent of the debt is worrying, the study said, because it could lead to “inter-generational dislocation”, as different age-groups are affected differently.

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