The number of corporate bankruptcies is at an all-time low because the state is catching everyone. The Bundeswehr has received 100 billion and the Ministry of Economics is currently working on a compensation for the high energy prices. All of this leads to new debt. The situation is slowly becoming confusing.

Who should pay for this? who has so much money – Significantly, in 1949, the carnival hit made a name for itself with this refrain. After the catastrophe, but already with the economic miracle on the horizon.

At the time, no one could have imagined today’s obligations of the state, namely 2.37 trillion euros, and the trend is rising, and even today very few can. How do such sums come about? What debt is this? And who pays them back?

On the latter point, reassuringly or not, one can say unequivocally: nobody. Government debts are generally never repaid. If the federal, state and local governments, together with all their shadow budgets, private companies and aid funds, planned to do this for small and medium-sized companies in need of existence, as things stand today, there would be a complete repayment in 2216 – this is how the taxpayers’ association has just calculated.

Prerequisite: No new loans are taken out, and one billion euros a month in interest and principal is paid. The scenario is of course completely unrealistic, but it puts things in perspective. The often-heard statement that debts are being shifted onto future generations is of course immediately clear.

However, the fact that government debt is always replaced when it falls due by taking out new loans, primarily by issuing government bonds, in no way means that today’s citizens are not faced with any significant burdens. On the contrary: Depending on the economic situation, interest rates and the creditworthiness of the state or quasi-state issuers of bonds, the costs will definitely increase. The old adage that “today’s debt is tomorrow’s taxes” is true, even though tomorrow is fast approaching.

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From a purely visual point of view, the German national debt at the end of 2021 added up to almost 59 percent of gross domestic product, i.e. annual economic output. This put Germany just below the threshold that, along with the budget deficit (maximum three percent), is part of the so-called Maastricht criteria of the monetary union treaties. However, all debts of the state and state-owned companies are by no means indiscriminately included in the determination.

In the near future it will be almost impossible to comply with these limits, nor with the debt brake anchored in the Basic Law. A plausible reason is the existence of an extraordinary emergency, which was first triggered by the corona pandemic and then by the war in Ukraine and its consequences.

An example of a state obligation that appears out of nowhere: the so-called Bundeswehr special fund of 100 billion euros to strengthen the army.

This leads to the topic of secondary or shadow budgets. Because, of course, the “special fund” is not taken from a randomly discovered money store. It’s not a fortune, it’s a debt. The Institute of the German Economy (IW) already counted 24 shadow budgets in 2020 in addition to the officially approved budget plans of the federal, state and local governments.

The Federal Court of Auditors currently has 30 such funds and side reserves. These are corona-related special pots (WSF), unpronounceable financial intervention groups such as “municipal investment promotion funds”, but also long-term financial vehicles at German and European level.

Of course, the Reconstruction Loan Corporation (KfW) as the federal development bank is also part of the state obligations. It refinances itself through its own bonds and promotes the economy and consumers according to defined criteria, currently primarily in the field of environmental protection. In view of the threatening situation in terms of energy supply, inflation and possible recession, KfW is likely to be challenged even more in the near future. Numerous companies, especially small and medium-sized ones, are currently only avoiding bankruptcy thanks to state aid.

Since the state is facing the challenges of a previously unknown situation of change, previous certainties must also be reconsidered: “The term turning point is becoming the code word of our epoch, because it marks a historical upheaval,” says Michael Hüther, director of the Institute of German Economics.

In addition to the challenges that are currently on everyone’s lips – such as deglobalization, supply chain problems, inflation and indebtedness, including private households and companies – the negative influences that have had an effect for some time have by no means disappeared.

Demographics, i.e. the aging of the population, is one of them. The inevitable digitization is another, whereby every citizen is faced with the shortage at the state level, literally with the fax traffic of the health authorities, most recently drastically with regard to the new property tax assessment.

The monetary union may also face a crucial test. In view of rising interest rates and simultaneously increasing inflation, the European Central Bank is likely to face further costly aid measures for many countries in the euro zone; these, like the various funds of the EU, are obligations that will one day have to be paid for. The alternative would be a collapse of the eurozone, and nobody wants to imagine the consequences.

Under the current circumstances, the question of who should pay for all this is probably pointless – because instead of paying, it is currently more about taking out further loans. In June, the Kiel Institute for the World Economy still conservatively estimated this year’s debt level in Germany at 65 percent of economic output – that is unlikely to be maintained.

The inflation rate will probably hardly decrease – the latest inflation data from the USA with an unexpected 9.1 percent has just triggered a new shock on the financial markets. This is also a portent for the eurozone.

If the wisdom used to be that inflation and wage increases also cause a devaluation of government debt, since the same amounts have to be paid nominally, but they are cheaper in real terms, this insight is no longer valid in the new economic world. Because the process of further borrowing succeeds across Europe only at higher interest rates, the sustainability of the debt burden does not improve at all.

According to the taxpayers’ association, just one percentage point higher interest rates increases the state’s interest burden by 14 billion euros a year. In almost the best environment of all time, Germany only had to spend four billion on debt service – that was in 2020 and is probably irretrievably over.

The discussion about higher taxes and levies, which is sure to start soon, will sing the song about it, and the refrain is: who should pay for it? who has so much money

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