Germany to raise record 471 billion euros in pandemic debt

Germany said on Thursday, December 17, it will issue up to 471 billion euros ($576 billion) worth of bonds in 2021, a record high, taking on massive debt to help Europe’s biggest economy get through the coronavirus pandemic.

“The comparatively high issuance volume is primarily a consequence of the COVID-19 pandemic, which has a considerable impact on the income and expenditures of the federal budget and its special funds,” the federal agency managing German debt said.

Germany issued 406.5 billion euros in bonds this year, twice the amount of last year, to help fund efforts to combat the crisis.

Germany has a constitutional “debt brake” in place that limits net new borrowing a year to 0.35% of total economic output, but Chancellor Angela Merkel’s Cabinet has suspended the rule to help the country cope through the pandemic.

It expects to return to its traditional budgetary rigor in 2022. 

More than a trillion euros have been released or pledged in help for companies and employees, be it through worker salary top-ups, loans, or direct handouts.

The huge spending commitment means Germany is having to take on 300 billion euros in net new debt in 2020 and 2021.

Some 222 billion euros of the new bond issuance would have a maturity period of between 2 and 30 years; 241 billion euros can be redeemed in 12 months or less, and another 6 billion to 8 billion euros will be indexed to inflation.

German government bonds or “Bunds” act as a benchmark on the international debt markets and are regarded as one of the safest investments, meaning the government should be able to raise the money at very low rates. – Rappler.com