Germany Flag National Debt

German National Debt – Learn Why Government Bonds Are So In Demand


The clock is reviewed (downward at present) on each reported debt release. However, if you have any debt the interest payable continues, so the clock continues to rise from the new lower reported point.

Source: The German government, report this gross debt under the Maastricht Treaty guidelines.

Last Updated: November 26, 2020

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The National Debt Of Germany

Germany’s national debt includes the money raised by Germany’s federal government through the issuance of debt instruments. Germany also includes the debts of its states and local government in the national debt figure. In fact, Germany refers to its national debts as “public debt.”

The German government was forced to bail out some banks during the financial crisis of 2008. The government still owns those banks and it includes their debts in the record of the public debt of the nation.

The table below explains what is included in the national debt figure and what isn’t:

German Government ObligationGovernment DepartmentIncluded in National Debt?
Government-issued bondsBundesrepublik Deutschland ‒ Finanzagentur GmbHYes
Short-term debt instrumentsBundesrepublik Deutschland ‒ Finanzagentur GmbHYes
State government debtBundesrepublik Deutschland ‒ Finanzagentur GmbHYes
Civil Service pension obligationsAllNo
National Pension obligationsDeutsche RentenversicherungNo
Rescued “bad banks”Federal Ministry of FinanceYes
National bank guarantee schemeFederal Ministry of FinanceNo
Accounts Payable (unpaid bills)AllNo

Who manages Germany’s national debt?

The Federal Ministry of Finance, based in Berlin, is responsible for managing Germany’s national debt, including raising funds. The Department of Financial Market Policy, which is also known as Directorate-General VII, is the Ministry department that is specifically in charge of overseeing all debt management issues on behalf of the government.

The German Finance Agency (Bundesrepublik Deutschland – Finanzagentur GmbH) is the government agency that issues bonds and other instruments to raise government funds through debt. The Finance Agency is based in Frankfurt am Main, which is the financial center of Germany. The Agency also raises funds through debt instruments on behalf of all of the German states.

How does the German government raise loans?

The German Finance Agency issues bonds through an auction process. The institutions that are allowed to take part in those auctions must be registered in the Bund Issues Auction Group. The dates for each auction are planned well in advance and are published at the end of the year in a calendar of events for the forthcoming year.

German government debt instruments fall into two categories:

  • Short-term debt instruments
  • Long-term debt instruments

The short-term instruments are what are often called “Treasury bills.” In Germany, these are called “Bubills.” The official name for these instruments is Unverzinsliche Schatzanweisungen. The German Finance Agency currently offers Bubills of six months duration. In the past, the Agency has written Bubills of three month, nine month, and one year durations. Bubills do not pay any interest, but they are sold at a discount and redeemed at full face value.

The long-term instruments at the disposal of the German Finance Agency are:

  • Schätze (Bundesschatzanweisungen) – two-year Treasury notes
  • Bobls (Bundesobligationen) – five-year Treasury notes
  • iBobls (Inflationsindexierte Bundesobligationen) – five year inflation-linked Treasury notes
  • Bunds (Bundesanleihen) – 10 and 30 year bonds
  • iBunds (Inflationsindexierte Bundesanleihen) – 10, 15 and 30 year inflation-linked bonds

Currently, the Agency is only issuing Schätze, Bobls, and Bunds. These are all fixed interest instruments that pay interest once a year and are redeemed at face value.

The proportion of debt in each instrument type issued by the Agency varies year to year. The current proportions of each type currently being issued by the German Finance Agency is ranked below in order of magnitude:

  1. Schätze
  2. 10 year Bunds
  3. 6 month Bubills
  4. Bobls
  5. 30 year Bunds

The table below shows the changing proportions of all instruments offered by the Federal government since 2008.

Proportion of German Federal Debt Instruments
Source: Finanzagentur GmbH

The  German Finance Agency also raises funds for the state governments. The Agency has one type of instrument for state government debt, which is the Bund Länder Bond (Bund-Länder-Anleihe). This type of bond has a maturity of seven years and pays interest annually. Each bond is jointly guaranteed by the Federal government and all of the states.

Is Germany’s national debt rising?

The Bundesbank, which is Germany’s central bank, reports that the country’s general government debt as a percentage of GDP was 64.1% at the end of 2017. This is lower than the previous year. In fact, the country’s debt has been falling for some time:

YearDebt level (€ billion)% of GDP

A falling level of debt is a good indicator for traders. It shows that the government has the capacity to repay debt instruments when they fall due. Such an indicator generally increases the value of government bonds and enables the government to charge a lower rate of interest when they issue new bonds. This is the case in Germany.

Under the Maastricht Treaty all EU government pledge to reduce their national debt to a debt to GDP ratio of 60%. Many countries ignore that obligation or try to delay the implementation of debt reduction. Germany’s debt to GDP ratio of 80.9% in 2010 was the peak figure. Since then the German government has been striving to get to the 60% target and it is almost there.

German bond interest rates?

Government bonds generally pay a lower rate of interest than bonds offered by companies. The rate that each government changes is influenced by its reputation for debt management. Germany has a very good reputation for responsible debt management and so its bonds are seen as a very safe place to store money. As a consequence of this reputation, traders will buy German bonds when there is more risk in other assets. This is called “a flight to safety.”

The variable reputation of governments across Europe gives bond traders the chance to switch instruments without having to exchange currency. When the world economy is going well and there aren’t any political issues in other European countries, bond traders will spread their risk by buying the bonds of several Euro nations, including Germany. If a country shows some volatility, such as a disruptive government in Italy, or the lack of a clear government in Spain, traders will sell the bonds of those worrying countries and use the money to increase their holding in safe bonds, such as those of Germany.

This means that German government bonds are always in demand, but at times that demand becomes excessive, driving up the resale price of the bonds on the secondary market.

Reichstag Berlin
Source: Pixabay

From 2015 to early 2018, the demand for German government bonds was so great that traders were prepared to buy them at a price that exceeded their face value. The price went so high that even taking into account the earnings expected from the interest on the bonds, traders were actually losing money by buying German government bonds. However, the low risk of those bonds during turbulent times in other markets made the loss a price that traders were willing to pay in order to avoid the risk of losses that could be incurred on other government bonds, such as those of Greece or Italy.

What facts should you know about Germany’s national debt?

  • You could wrap $1 bills around the Earth 10,114 times with the debt amount.

  • If you lay $1 bills on top of each other they would make a pile 283,749 km, or 176,313 miles high.

  • That's equivalent to 0.74 trips to the Moon.

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