Bild: Debts like never before – Germany’s mega debt plan

Germany starts a mega deficit era, like never seen before.
Chancellor hopeful Merz, of the conservative CDU, in coalition talks with the Socialist SPD, has agreed to abolish the constitutional debt ceiling and go in full speed for a government new debt increase, as never seen before.
An extra new debt amount of EUR 500 billion will be kept separate from the budget. This amount is destined to pay for renovation of the German infrastructure.
The already debt financed separate treasury of EUR 100 billion destined to the German army is already fully booked. Therefore, the debt ceiling is lifted additionally for any additional defense expenses which are measured at 1% of GDP, say another EUR 44 billion.
The lifting of the constitutional debt ceiling requires a 2/3 majority in Parliament which the new CDU/SPD coalition needs to find with other parties. From such compromise will result other costs and billions to be added.
In additional, regions and communal bodies will as well raise additional debts.
It is a mega debt bonanza under preparation in Germany.
The financing is a pure debt financing via the capital markets, usually with bonds of the German state. These bonds can always be used by banks and investors to either sell them or pledge them to the European Central Bank which will print the necessary money if needed.
The bonds may have a maturity of 10 years or more. At the end of the maturity, the German state needs to repay the full amount, usually with interests, unless sold initially at a discount. It is an enormous amount to raise on the capital markets and the conditions for such an amount are unsure. In addition, there is the question of European governments seizing Russian assets, a confiscation. Such act, even still undecided, will have a certain impact on Germany’s borrowing costs. The moment is not ideal.
The lifting of the debt ceiling is delicate because then-candidate promised before the election not to do it. Never. Now, what a surprise for his voters.