How will the big debt wave end?

Germany's debt is rising rapidly...

Last night, the Budget Committee put the finishing touches to the federal budget for the coming year. The budget is expected to be approved by the Bundestag the week after next. According to the government's plans, the federal government will take on more than €180 billion in new debt next year – almost €40 billion more than estimated for the current year. A look at the financial planning up to 2029 shows that similarly high deficits are planned for the coming years. All in all, government debt is likely to rise to almost 90 percent of GDP over the next ten years. The debt ratio would then be significantly higher than during the financial crisis.

... which also applies to the rest of the eurozone

Despite this sharp increase, Germany's debt ratio will still be well below the eurozone average in 2035. This is because debt in the eurozone is likely to be just under 90 percent of GDP this year and is expected to rise further in the coming years. The budgets of almost all eurozone countries are being burdened by higher financing costs, rising defense spending, and unfavorable demographics, which many governments will finance in part through new debt (see title chart). The alternative – radical budget consolidation through lower spending or higher taxes – is meeting with resistance from politicians and voters, and not only in Germany and France.

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