German finance ministry expects interest burden to nearly double in 2023

A general view of the German Federal Ministry of Finance at dusk, in Berlin, Germany, September 9, 2021. REUTERS/Annegret Hilse

BERLIN, June 21 (Reuters) – Rising interest rates and high inflation will cause the German government’s interest burden to nearly double for 2023, according to an internal assessment from the finance ministry.

In the assessment, seen by Reuters on Tuesday, the ministry assumes interest expenses of about 29.6 billion euros ($31.27 billion) for 2023. For 2022, the amount is estimated at 16.3 billion euros.

The reason given by the ministry is the rise in interest rates and inflation. Price increases lead to higher interest payments for inflation-indexed federal securities.

Ministry officials also assume a high interest burden for the years after 2023: For 2024 it is estimated at just under 25.2 billion euros, and for 2025 and 2026 at around 27.7 billion euros and just under 29.5 billion euros, respectively.

The cost of federal debt had declined significantly in recent years: Whereas in 2013 it stood at 31.3 billion euros, in 2021 the government only had to spend 3.9 billion euros.

This was also due to the fact that the federal government earned money by incurring debt in times of negative interest rates. For years, investors gave the federal government more money when taking on debt than they got back in the end.

($1 = 0.9466 euros)