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Germany to borrow €250 billion to service debt

The Local · 21 Dec 2011, 13:40

Published: 21 Dec 2011 13:40 GMT+01:00

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"The annual preview of government issuance in 2012 contains one-off issues with a total volume of €250 billion, which will serve to finance the federal government budget and the special funds of the federal government in 2012," the agency said in a statement.

In 2011, Germany had initially planned to raise €302 billion before revising the figure downward to €275 billion, with two-thirds coming from the bond market and one-third from the money market.

The fresh money borrowed will be used to repay the country's debts and the interest on them, the agency said.

Germany, Europe's top economy, has more than €2.0 trillion in debt or more than 80 percent of its gross domestic product, resulting in interest charges of tens of billions of euros annually.

It benefits from lower borrowing rates compared to many of its partners in the eurozone, which have been hit hard by sinking investor confidence.

However market volatility has taken its toll. Investors shunned a November auction of German 10-year bonds, considered the gold standard of eurozone debt, in a development that sent shock waves

through the single currency area.

But it had better luck with an issue of two-year treasury notes this month which saw strong demand and brought in more than €4.0 billion.

In its breakdown of government borrowing, the agency said it would continue issuing treasury discount papers or "Bubills" on a six-month basis (€4.0 billion) and a 12-month basis (€3.0 billion) next year.

New federal treasury notes with two-year maturity known as "Schätze" will be auctioned in February, May, August and November, with an outstanding volume for each note set at €15 billion.

Five-year federal notes or "Bobls" will also continue with three new series with a volume of €4.0 billion. Reopenings of the note are planned for February, March and April with a total volume of €15 billion.

Another series will be issued in May and September with a volume of €5.0 billion each.

Federal bonds with a 10-year maturity, known as "Bunds", are planned in 2012 with a total outstanding volume of €20 billion. Thirty-year Bunds will have a total outstanding volume of €15 billion.

Story continues below…

"Depending on the funding requirements and liquidity situations of the federal government, as well as on the market situation, the amounts and issue dates in the annual preview remain subject to change," the agency said.

"However the federal government intends to adhere to the announced issuance calendar as far as possible in order to provide market."


The Local (news@thelocal.de)

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Your comments about this article

14:13 December 21, 2011 by jmclewis
Borrowing money to prop up a Euro bailout fund, this is such a wise course of action.
14:39 December 21, 2011 by frankiep
Borrowing €250 billion to service debt for the year? Amateurs. This is a regular Monday morning in the US.
19:46 December 21, 2011 by MichaelMolenaar
If Germans could vote on this, how would they vote?
23:04 December 21, 2011 by Logic Guy
Well, human life is rather simple, for those who understand the truth.

In reality, there is a real, psychological problem, if a person, or nation, is in such a position that they must constantly borrow money just to stay afloat.

Nations such as Germany and America, could rather easily become financially independent, if they were to think EFFICIENCY. Surely this is the key. Simple stuff!
17:25 December 22, 2011 by raandy
Borrowing the money is common amongst Nations, it is when you are unable to pay it back that it becomes a problem. I doubt that this is going to be a problem for Germany.
00:30 December 23, 2011 by cobalisk
A rather misleading article.

Nations borrow money because most tax receipts only come a few times a year, yet expenses must be paid everyday. Germany is not in debt. The article implies that it is but this is false.

Currently, Germany is operating just a shade in the red as it spends slightly more than it takes in (by less than 2%) per year.

The 'Debt' that the article is referring to is long term outstanding bonds which have maturities from 5 to 10 or even 20 years. Counting all of that at once is silly, misleading and completely pointless.

The Maastricht Treaty requires a nation be under 60% (Total Long term Debt vs GDP), because the ECB knows that it is almost impossible for a nation to be debt free as virtually all nations sell long term bonds.

Currently, Germany is over this limit (82%) and is working its way back down.

In other words, every thing is fine.
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