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ECONOMY

Germany to borrow €250 billion to service debt

Germany intends to borrow up to €250 billion ($329 billion) from the markets in 2012, less than this year's level, the government's financing agency said Wednesday.

Published: 21 December 2011 13:40 CET
Germany to borrow €250 billion to service debt
Photo:DPA

“The annual preview of government issuance in 2012 contains one-off issues with a total volume of €250 billion, which will serve to finance the federal government budget and the special funds of the federal government in 2012,” the agency said in a statement.

In 2011, Germany had initially planned to raise €302 billion before revising the figure downward to €275 billion, with two-thirds coming from the bond market and one-third from the money market.

The fresh money borrowed will be used to repay the country’s debts and the interest on them, the agency said.

Germany, Europe’s top economy, has more than €2.0 trillion in debt or more than 80 percent of its gross domestic product, resulting in interest charges of tens of billions of euros annually.

It benefits from lower borrowing rates compared to many of its partners in the eurozone, which have been hit hard by sinking investor confidence.

However market volatility has taken its toll. Investors shunned a November auction of German 10-year bonds, considered the gold standard of eurozone debt, in a development that sent shock waves

through the single currency area.

But it had better luck with an issue of two-year treasury notes this month which saw strong demand and brought in more than €4.0 billion.

In its breakdown of government borrowing, the agency said it would continue issuing treasury discount papers or “Bubills” on a six-month basis (€4.0 billion) and a 12-month basis (€3.0 billion) next year.

New federal treasury notes with two-year maturity known as “Schätze” will be auctioned in February, May, August and November, with an outstanding volume for each note set at €15 billion.

Five-year federal notes or “Bobls” will also continue with three new series with a volume of €4.0 billion. Reopenings of the note are planned for February, March and April with a total volume of €15 billion.

Another series will be issued in May and September with a volume of €5.0 billion each.

Federal bonds with a 10-year maturity, known as “Bunds”, are planned in 2012 with a total outstanding volume of €20 billion. Thirty-year Bunds will have a total outstanding volume of €15 billion.

“Depending on the funding requirements and liquidity situations of the federal government, as well as on the market situation, the amounts and issue dates in the annual preview remain subject to change,” the agency said.

“However the federal government intends to adhere to the announced issuance calendar as far as possible in order to provide market.”

AFP/jcw

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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