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Debt hits new record high

The Local · 20 Dec 2010, 14:44

Published: 20 Dec 2010 14:44 GMT+01:00

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While Germany’s new debt arising from the financial crisis will not be as burdensome as was expected this year, it will still reach about €50 billion, latest calculations from the Finance Ministry show.

Bank bailouts, the extension of the subsidised Kurzarbeit scheme and extra money for heat insulation in schools and kindergartens, have all forced the federal government to dish out massive amounts of money.

New borrowing was expected to top €80 billion in 2010, but strong economic growth and increased tax revenues has relieved some of the pressure on the public purse.

“According to current assessments, a result of under €50 billion is possible by the end of the year with regard to new debt,” a monthly report from the Finance Ministry said.

Net borrowing by the government is nevertheless the highest by far in German history.

For 2011, the federal government has planned to take on new debt of €48.4 billion. Officials expect tax revenues to be 0.3 percent higher than last year.

The entire deficit of all public budgets – federal, state and municipal – climbed in the first nine months of the year by nearly €100 billion.

On September 30, the federal, state and municipal governments together owed about €1.79 trillion, according the Federal Statistics Office, which is nearly €100 billion – or 5.9 percent – more than at the end of 2009. Per person, it works out to €21,882.

Story continues below…

The federal government owes the most money – just over €1 trillion, or a rise of 3.1 percent. However the states’ debt grew most quickly, by 11.6 percent or €61.4 billion, to owe €588.1 billion by the end of September.

DPA/The Local/dw

The Local (news@thelocal.de)

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Your comments about this article

15:27 December 20, 2010 by DinhoPilot
Now the 1.000.000 euro question in the end of the article? Is that really bad? Is it o.k? Will the economy and export sustain the german economy for the upcoming years? Will the people feel this as another burden next year?! Sometimes I wish I had studied economics ^^
16:39 December 20, 2010 by cobalisk
I don't normally criticize the articles themselves because, besides being bad form, often the issues are minor. However in this case there are some really egregious problems in the above article.

The amount of public debt being held is not the actual deficit. Besides, you factor out the debt as a cost per person like it is some kind of bill that will be put in the mail for each citizen.

Government debt is bought by citizens, businesses, insurances, pensions et al. in the form of bonds (Bunds in this case) which are paid back over a period of time so the total bill does not reflect the actual annual repayment required which is a much smaller number. So what we see is the government borrows from its citizens to provide services and infrastructure and repays them over time with interest, a pretty good deal for the citizenry.

As most people already know, recent public borrowing swelled to counteract the decline of business income due to the Great Recession and look, it worked great! After sputtering for a bit the economy re-engaged globally and locally and now Germany is rolling along, with robust growth and excellent prospects. So that means that the borrowed money can be paid off, as evidenced by the reduction in overhang already being projected.

The topline figure may be high but it is grossly inaccurate as much of it is long term, low interest debt with a repayment schedule the government will have no trouble meeting. Even China carries public debt for god's sakes. Why? Because nations borrow money now against future tax receipts later. This is standard practice, worldwide.

This article gives a completely false picture by conflating debt, borrowing and deficit spending like they are all the same thing, which they are most certainly not. Topline numbers are higher but Germany's actual deficit percentages are lower than last year, showing an aggressive repayment program already in place.

In other words, with a re-engaged economy Germany is doing a good job (not great but good) of paying down recent deficit spending. THAT should have been your article.

Do your homework people.
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