Germany earns two billion euros with its debt in first quarter - document

04/22/2021 | 06:13am

BERLIN (Reuters) - Germany earned roughly 2 billion euros ($2.4 billion) from issuing new bonds in the first quarter alone as negative yields continue to push down Berlin's overall debt servicing costs to record lows, a finance ministry document showed on Thursday.

The lower-than-expected borrowing costs are enabled by the European Central Bank's loose monetary policy and Germany's international reputation as a fiscally reliable country, resulting in negative interest rates even for longer maturities.

In a letter seen by Reuters following a parliamentary request, Deputy Finance Minister Sarah Ryglewski told opposition lawmaker Fabio De Masi that the government issued capital market instruments in 20 auctions on 18 dates in the first three months of 2021 to finance the federal budget and special funds.

A total premium of 2.07 billion euros was received in these auctions, Ryglewski wrote, adding that the average issuing yield was -0.54% and the average bid-to-cover ratio stood at 1.54. The issuing volume was 59.7 billion euros.

De Masio from The Left party said the figures underlined that Finance Minister Olaf Scholz was making a lot of money with its debt and that Berlin could have sold even more bonds in those auctions as demand was higher than the supply.

"German bonds are solid as a rock. The ECB is doing its job by keeping interest rates low so that Olaf Scholz doesn't need to worry about finances," de Masi said.

"Anyone who wants to go back to the debt brake under these circumstances and slash public investments or the welfare state is an economic wrong-way driver. Germany can grow out of its debt in the long term without any problems!"

Scholz has already said that the government will have to suspend the fiscal rules of the debt brake, which limit federal borrowing to 0.35% of economic output, for a third year in a row in 2022 as the pandemic makes huge demands on public finances.

German debt servicing costs roughly halved to 6.4 billion euros last year, the lowest level in more than 40 years, despite the government's decision to borrow more than ever before to finance rescue measures in the COVID-19 pandemic.

However, the government is not expecting this positive trend to last which is why the finance ministry decided to increase the item for expected interest expenditure in its supplementary budget by 4.5 billion euros to 10.3 billion euros for this year.

In that budget, the government is pushing up its planned new borrowing to 240 billion euros this year to finance its extended rescue and stimulus measures in the COVID-19 pandemic.

Germany is struggling to contain an aggressive third wave of infections in Europe's largest economy. Its efforts are complicated by the more contagious B117 variant of the coronavirus and a relatively slow introduction of vaccines.

($1 = 0.8303 euros)

(Reporting by Michael Nienaber and Rene Wagner; Editing by Toby Chopra)

© Reuters 2021
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