Germany's public debt rises to record level

Compared to the end of 2022, Germany's public debt increased by 38.8 billion euros in the first quarter of 2023, mainly due to the increased financial needs of the federal government to deal with the energy crisis. To reduce the impact of rising energy prices, the German government established an Economic Stabilization Fund in November 2022 and has so far raised 52.4 billion euros, while also imposing additional price caps on electricity and gas to "cool down" energy price inflation.

The spike in energy prices following the Ukraine crisis is the main reason for the high inflation in Germany in 2022, forcing the government to quickly find a way to ease it. According to the latest official figures, German energy consumer prices fell 2.6% in May.

The German government has been spending heavily on measures to curb inflation, but it plans to return to a balanced budget by 2023. To achieve this, the "debt brake" policy - a measure that restricts new borrowing - will be restored for the first time since 2020.

In a statement earlier this month, German Finance Minister Christian Lindner stressed that the "debt brake" policy is important for economic reasons, that fiscal and monetary policies need to be harmoniously combined to fight inflation and avoid the two policies being in conflict.

In 2020, the German government lifted its “debt brake” policy to facilitate support in the context of the COVID-19 pandemic. However, restoring this policy is now a top priority for the Ministry of Finance at a time when Europe's leading economy is facing many difficulties due to the impact of the Russia-Ukraine conflict.

According to VNA