Interest expenses increase drastically in the budget.
(Photo: dpa)
Berlin The turnaround in interest rates hit Christian Lindner with full force. While the Federal Minister of Finance had to spend just four billion euros on debt service last year, according to his draft budget it will be almost 30 billion euros next year.
It may be that the budget holders in the ministry are very careful with their calculations and that there are still a few safety buffers in the calculations. But that doesn’t change the basic diagnosis: the rising interest rates on the markets are affecting the federal budget much faster and harder than many politicians and economists had expected.
This is also due to some financial constructs with which the federal government has been able to reduce its interest burden in particular in recent years. What has paid off for a long time is now the opposite: instead of premiums on bonds, the federal government has to accept discounts. Expenditure on inflation-linked bonds is also increasing rapidly.
The golden budget times, in which the budget restructured almost by itself thanks to falling interest payments, are finally over. Wolfgang Schäuble (CDU) once managed to break even, meaning a debt-free household, faster than expected. Falling expenditure on debt servicing made a significant contribution to this. They also enabled his successor, the current Chancellor Olaf Scholz (SPD), to significantly increase spending despite the debt brake.
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Year after year, the Ministry of Finance has said that interest expenditure is really not going to fall any further. They did, up to those four billion euros in 2021. You don’t necessarily have to blame the finance ministers for getting everything that was possible during the low-interest phase. However, it is critical that no one thought about the time when interest rates would rise again. No kind of provision was made for this.
>> Read here: The interest rate explosion: Why Lindner’s debt costs are increasing almost eightfold
In the economic debate, too, the view became more firmly established that zero interest rates would continue for the foreseeable future and that debt would therefore no longer be a problem. As with the energy supply, German politics was now very roughly awakened from this carelessness.
A look at the household shows that loans come at a price. Debt service is once again becoming one of the larger expenditure items in the budget and is thus competing with other tasks to be financed, such as education or climate protection.
In this respect, the rising interest rates are a warning at the right time and a good argument for the finance minister when he urges compliance with the debt brake again.
More: Lindner plans new debt of 17.2 billion euros