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MONEY

Germany faces massive national debt

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.

Germany faces massive national debt
Photo: DPA

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.

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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MONEY

Where in Germany do people have the highest disposable income?

An economic study has shown huge regional differences in income throughout Germany. So which parts of the country have the most to spend each month, and which are feeling the squeeze?

Where in Germany do people have the highest disposable income?

A study by the Economic and Social Sciences Institute (WSI) of the Hans-Böckler foundation reveals stark regional differences in disposable income in Germany. In some cases, households had as much as double the spending money of those in other parts of the country. 

Here’s where people have the most – and least – disposable income each month.

What is disposable income?

The WSI calculated disposable income as the sum of income from wealth and employment, minus social contributions, income taxes, property taxes and other direct benefits or taxes.

What’s left is the income which private households can either spend on consumer goods or save.

The study, which was based on the most recent available national accounts data for 2019, looked at the disposable income of all of the 401 counties, districts and cities across Germany.

Which regions have the highest and lowest disposable incomes?

The study found that the regions with the highest disposable incomes were in the southern states.

Heilbronn in Baden-Württemberg had the highest disposable income of all 401 German counties and independent cities – with an average per capita disposable income of €42,275. The district of Starnberg in Bayern followed in second place with €38,509.

READ ALSO: REVEALED: How much do employees really earn across Germany’s states?

By comparison, per capita incomes in the cities of Gelsenkirchen and Duisburg in North Rhine-Westphalia were less than half as high, at €17,015 and €17,741 respectively. These regions had the lowest disposable income in the country. 

The study also found that, more than thirty years since German reunification, the eastern regions continue to lag behind those in the west in terms of wages.

According to the WSI, the Potsdam-Mittelmark district is the only district in the former east where the disposable per capita income of €24,127 exceeds the national average of €23,706.

Do regional price differences balance things out?

The study also showed that regionally different price levels contribute to a certain levelling out of disposable incomes, as regions with high incomes also tend to have higher rents and other living costs.

“People then have more money in their wallets, but they cannot afford more to the same extent,” WSI scientist Toralf Pusch explained.

READ ALSO: EXPLAINED: When will Germany raise the minimum wage?

Therefore, incomes in the eastern states, adjusted for purchasing power, are generally somewhat higher than the per capita amounts would suggest.

That could explain why, even after price adjustment, the cities of Gelsenkirchen and Duisburg in western Germany continue to be at the very bottom of the list.

Saxon-Anhalt’s Halle an der Saale, on the other hand, which has an average disposable income of only €18,527, benefits from the lower prices in the east.

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