Germany has cut its debt due to the strong economy and reducing the burden of rescuing troubled banks in the financial crisis. The Bundesbank, the German central bank, said today that government debt has fallen to 64% of its annual GDP at the end of 2017 compared to 68% of GDP in 2016. The level is approaching the 60% of GDP threshold set by the Eurozone agreement.
The decline, however, is largely due not to the government’s sparingly but to the release of the problematic financial assets accumulated in a “bad banks” during the financial crisis. Then the government saved financial institutions, hit by low liquidity and big losses.
Germany also has a slight budget surplus despite complaints from trade unions and economists that it is time for the government to spend more on infrastructure and other investment.
Berlin’s fiscal discipline campaign marks a small but symbolic achievement in the first week of 2018: for the first time in more than two decades, Germany’s closely watched “Debt Clock” moved backwards. It was reprogrammed on January 1 to take into account the new federal and regional budget plans. The Debt Clock then touched down on minus 78 EUR per second, thus showing for the first time that the public debt of the country is declining. In 2009, at the beginning of the financial crisis, it showed that Germany’s debt is growing at a rate of over 4,400 EUR per second.
The Debt Clock, or Schuldenuhr, is supported by the German Federation of Taxpayers and is exhibited at the headquarters of the group in Berlin.