European Liabilities Absent from German Debt Statistics
ResearchZEW Study on the Transparency of EU Debt Burden
Germany’s financial liabilities are larger than indicated in the official statistics on public debt. The reason for this is the EU’s debt burden, which does not appear in the national data. This European debt has led to hidden liabilities, which will soon account for nearly ten per cent of the German government debt. Costing 750 billion euros for taxpayers, the coronavirus economic recovery plan “Next Generation EU” (NGEU) in particular has brought about a financial burden for Germany which is not included in the German debt statistics. These are the findings of a study conducted by ZEW Mannheim with the support of the Strube Stiftung.
“EU debt is politically attractive. Economically, however, it creates the wrong incentives, especially for highly indebted Member States. There is an urgent need for EU debt to be counted towards the national debt of the Member States. Doing so would remedy the current lack of fiscal transparency,” explains Friedrich Heinemann, head of ZEW’s “Corporate Taxation and Public Finance” Research Unit.
German share of debt amounts to 262 billion euros
Germany’s share of the repayment of the grants and programmes in the coronavirus recovery plan amounts to around 109 billion euros after all funds have been fully disbursed. In addition, Germany will assume liabilities totalling 134 billion euros until all NGEU loans are repaid by 2058. Furthermore, Germany’s share of EU loans to non-EU countries amounts to an additional 18 billion euros. The above figure quantifies all three types and shows their percentage relationship to gross domestic product (GDP). “For Germany, the sum of indirect repayment obligations amounts to 262 billion euros when fully paid out according to plan. That equates to almost six per cent of Germany’s GDP. That is a hefty sum that further restricts Germany’s fiscal space,” says Friedrich Heinemann.
Fiscal opacity of EU debt level
The coronavirus economic recovery plan uses debt to finance subsidies for Member States and EU budget expenditure, a first for the EU. Beneficiary Member States are not required to pay back these grants. Instead, they are later repaid from the EU budget. Since the EU budget is funded by the Member States, however, these repayments are only achieved through their contributions. This has resulted in a lack of fiscal transparency, given that national debt statistics no longer show these liabilities in full.
