Germany's true debt burden: 2.62 trillion euros too little?

Germany's true debt burden: 2.62 trillion euros too little?

According to the Bundesbank, Germany's mountain of debt amounts to 2.62 trillion euros, although this amount has increased by 62 billion euros compared to the previous year. Despite the decline in debt levels to 63.7 percent of nominal gross domestic product, economists from the Center for Economic Research (ZEW) and the Strube Foundation see a discrepancy in the published data. According to a ZEW study, Germany's actual debt is 261.5 billion euros higher because EU debt is not taken into account in national data, which affects member states' fiscal space.

The economists emphasize that EU debt may be politically attractive, but creates the wrong economic incentives, especially for heavily indebted countries. They are calling for the EU debt to be allocated to the national debt of the member states in order to overcome the current fiscal lack of transparency. In particular, the EU's measures to deal with the consequences of the corona pandemic have contributed to an increase in German debt. The “Next Generation EU” reconstruction plan has given Germany financial obligations worth 750 billion euros.

The ZEW study divides Germany's EU debt into different areas, with the largest share being attributable to the repayment of grants and programs in the Corona reconstruction plan. Germany also provides guarantees and a share of EU loans to non-member states. The German mountain of debt will therefore be significantly increased by the EU measures. It remains to be seen how these developments will impact Germany's fiscal situation in the long term.