German public debt spending set to double : Media – Other media

According to the report, due to a miscalculation in previous governments’ inflation forecasts, Germany’s interest payments on its public debt will drop by 16 billion euros ($16.09 billion). to almost 30 billion euros next year, as the federal government issued bonds. which are linked to the rate of inflation in recent years, RT reported.

The outlet says Berlin underestimated the risk of rising inflation and as a result now faces the need to provide much larger sums to service these bonds.

“According to the draft budget documents for 2023, around 7.6 billion euros are to be set aside for the repayment of so-called inflation-linked bonds over the coming year. That’s 3 billion euros of more than this year and almost 7 billion euros more than last year, when inflation was still low,” reports the RND.

According to the German Debt Office, the amount of these indexed public loans is currently around 65 billion euros, or just under 5% of the country’s total public debt of 1.5 trillion euros. However, the share of these loans in interest payments is very disproportionate and amounts to around 25%.

The report points out that banks, insurance companies or funds that have granted loans to the German government will mainly benefit from the situation, since they will receive more money in interest payments. However, German taxpayers are unlikely to be happy, as it is their money that will be spent on interest payments.

“Betting on infinitely low inflation rates by going into debt was a mistake that now becomes very costly for taxpayers,” said Dietmar Bartsch, leader of the left-wing faction in the German parliament, commenting on the situation. He also demanded an investigation into the debt policies of previous governments.

Yet regardless of the high cost of inflation-linked bonds, German federal spending on its debt is likely to continue to grow over the next few years, RND notes, as interest rates are also expected to rise as Europe tries to fight against an economic crisis. . For example, the European Central Bank (ECB) is expected to introduce an interest rate hike later this month, for the first time in 11 years.

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John A. Bogar