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21 September 2021

How investors are paying the German government to borrow

Negative interest rates mean the German government earned €4.25bn between January and August.

By Michael Goodier

Germany’s government earned €4.25bn between January and August by issuing new bonds, as negative interest rates continue to push down its debt servicing costs.

A state secretary in the finance ministry, Sarah Ryglewski, told Fabio De Masi, an MP for Die Linke party, that the government issued bonds worth more than €275bn in the first eight months of 2021 to finance the federal budget and special funds, receiving a premium of €4.25bn.

The extra billions were raised because, owing to negative rates, investors lend the federal government more money than they receive in return. Germany enjoys a AAA credit rating from the major agencies meaning, its bonds are viewed as a safe haven. 

Due to the high cost of funding the Covid-19 crisis, the German government will borrow up to €240bn this year, in addition to the €130bn it borrowed last year. This was only possible after the suspension of constitutional debt limits.

De Masi told Reuters that negative rates meant there was no need to return to the debt limits from 2023. “If we return to the debt brake too quickly, there is a risk of choking off the economic recovery, public investment and the welfare state,” he said.

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