Wednesday, December 29, 2021
60 billion euros in chalk
Pandemic drives federal states into new debt
Because of the debt brake, no state government is planning new debts in 2020. However, the corona virus is forcing the federal states to take out loans worth billions. The financial consequences of the pandemic will be felt for decades to come.
The 16 federal states have so far accumulated almost 60 billion euros in new debt in the Corona crisis. Despite the high sum, this is significantly less than feared in the first phase of the pandemic. The credit authorizations approved by the state parliaments go far beyond this, but have so far hardly been exhausted by any state government. This was the result of a dpa survey among the finance ministries and authorities in the 16 countries.
At least three federal states – Lower Saxony, Thuringia, and Baden-Württemberg – want to start paying off the corona debts as early as next year. After the beginning of the crisis, the state parliaments, the citizenships of the two Hanseatic cities and the Berlin House of Representatives approved over 100 billion euros in new debts in 2020 alone. In the process, several countries made quasi-reserve decisions, because they extend the borrowing process over several years.
Bavaria is the front runner
Originally, no state government had planned new debts in 2020 because of the debt brake. In 2020 and 2021, the federal states actually took out new loans amounting to a good 57.6 billion euros. Since the year is not over yet, not all states wanted to submit water level reports, for example Lower Saxony and Rhineland-Palatinate. It is clear, however, that the total of over 100 billion approved in the 16 countries in 2020 will not be nearly exhausted by the end of this year. But there are immense differences among the 16: The three large states Bavaria, North Rhine-Westphalia and Baden-Württemberg alone have received almost half of the total of almost 60 billion.
The front runner in terms of new borrowing is by far Bavaria, turning away from the former white-and-blue guidelines in financial policy. The state parliament in Munich has approved up to 20 billion euros in new loans to the state government, and a separately running “Bayernfonds” is likely to be in debt up to 40 billion euros. The state government has raised 10.1 billion in both years so far.
According to the Bavarian Ministry of Finance in Munich, another 5.8 billion are planned for next year. North Rhine-Westphalia has approved loan authorizations of up to 25 billion euros; according to the Ministry of Finance in Düsseldorf, 8.1 billion euros have been borrowed so far in 2020 and 2021.
High loans in economically weak countries
Baden-Württemberg has set the third highest debt limit at 14.6 billion. In fact, according to the finance ministry in Stuttgart, the green-black state government has so far raised 9.3 billion, more than North Rhine-Westphalia. Baden-Württemberg wants to start repayments as early as 2022: A repayment of 958 million euros is planned for 2022. Lower Saxony also wants to repay almost 700 million, Thuringia 171 million.
Although the debt limit has been undercut almost everywhere, the countries will have to bear the financial consequences of the pandemic for decades. Some relatively economically weak countries have taken out very high loans by their standards, including Schleswig-Holstein with 2.5 billion and Mecklenburg-Western Pomerania with 3.9 billion euros. The financially weak federal capital Berlin has raised as much as 7.3 billion.