According to a press release by Deutsche Bundesbank, the general government debt in Germany rose by €62 billion in 2023, reaching a total of €2.62 trillion. This calculation is based on the definition of government debt outlined in the Maastricht Treaty, which is standardized across the European Union. While the increase in debt was similar to the previous year, it marked a significant slowdown compared to previous years.
The central government debt accounted for the majority of the increase, growing by €75 billion, while state government debt continued to decline. Despite the rise in debt, the debt ratio, which measures the ratio of debt to nominal gross domestic product (GDP), decreased for the second consecutive year to 63.7%. This decline of 2.4 percentage points was attributed to strong growth in nominal GDP, largely fueled by high inflation.
It is noteworthy that the increase in debt was lower than the general government deficit of €87 billion. Part of the deficit was financed by drawing on available bank deposits, which the government had accumulated during the coronavirus pandemic. Additionally, lower borrowing was facilitated by the repayment of funds previously lent by the government to support energy supply companies and pandemic-related assistance loans.
The liabilities of government-owned “bad banks” decreased, contributing to a reduction in overall debt. However, government support measures for domestic financial institutions and assistance loans for euro area countries remained significant factors affecting the debt level.
Furthermore, Eurostat recently published data on the Maastricht debt of EU institutions, revealing Germany’s estimated share of €60 billion, or 1.5% of GDP. This consolidated debt reflects debt-financed grants from the EU off-budget entity Next Generation EU, which began operations in 2021. Germany’s financial contribution to the EU budget, currently around 25%, plays a crucial role in financing this debt.
The table provided outlines the changes in debt level and GDP percentage over the past several years, indicating fluctuations in Germany’s fiscal position.
As Germany continues to navigate economic challenges and fiscal responsibilities, managing its debt levels will remain a key priority for policymakers.
