Germany’s Bundesbank central bank has calculated that under current government policy, German debt will get close to 100% of GDP—in 15 years. The deficit will reach 4% in 2027 and stay there until 2035. “The debt rate will therefore go in the direction of 90% in 2040 and eventually over 100%,” the Bundesbank writes [in a new report](https://publikationen.bundesbank.de/publikationen-de/berichte-studien/wie-die-schuldenbremse-weiterentwickelt-werden-koennte-970752 on Nov. 11.
A 100% debt rate to GDP is not the end of the world. In the EU, France, Italy, Spain, Belgium and Greece, all of them have a higher than 100% debt ratio. However, Germany’s share of overall sovereign debt in the EU would go from the current 18.5% to more than 28%—assuming that the overall debt does not increase. The consequence would be a “crowded” bond market with relative increase of refinancing costs, devaluation of the current bond stock etc.
The Bundesbank does not address those implications, but criticizes the government trick of shifting some defense investments from the budget to the new “special funds,” thus liberating resources for redistribution, and proposes a three-stage plan for a soft-landing.
