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Debt levels of the German federal states will return to the pre-pandemic levels with 5 to 10 years if the recovery is as expected, a senior researcher at the Ifo Institute said Thursday. Pointing to debt levels as a percentage of regional GDP and not an absolute level, Remo Nitschke said the key consideration will be growth over repayment. "As economic output rises over the coming years, the proportion of debt will fall." he said.
Ifo say Lander repayment plans shouldn't be designed to repay the debt as quickly as possible, but to allow for strong economic growth as well. High repayments often lead to spending cuts in sectors important to growth such as education and public investment, Nitschke notes -- underlining the fact that fiscal support from government at all levels will remain a necessary component of the recovery
Destatis, Germany's state statistics agency, said public debt rose to EUR2.195 trillion through the end Q3 2020, with Lander debt at EUR631 trillion.
Source: DeStatis
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.