German public debt shrinks on bad asset sales | Business| Economy and finance news from a German perspective | DW | 26.06.2013
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Business

German public debt shrinks on bad asset sales

Germany’s public debt run up by the government and regional and local administrations has diminished in 2013. Growing state revenues and better debt management have shaved a few inches off the debt mountain.

In the first three months of 2013, the total of German public debt amounted to 2,057 billion euros ($2,689 billion), which was 0.7 percent or 14.2 billion euros less than in the final three-month period of 2012, the German Statistics office, Destatis, said Wednesday.

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The reduction was partly the result of growing economic output and higher state revenues at the beginning of 2013, Destatis said. However, the biggest contributions to debt reduction was made by two bad banks, the statisticians reported.

“German bad banks FMS Wertmanagement and Erste Abwicklungsanstalt (EAA) contributed most significantly to the positive trend,” Destatis said in a statement.

The two banks hold toxic assets worth several billion euros, which have been outsourced by Germany's troubled lenders Hypo Real Estate, Commerzbank and WestLB in the wake of the 2008/2009 financial crisis. State-funded bad banks FMS and EAA are charged with liquidating those assets.

Despite the debt reduction, Germany's federal government remains the biggest debtor with debt to the tune of 1,286 billion euros by the end of March. The debt accumulated by the country's 16 regional governments amounted to 635 billion euros, while local municipalities owed 135 billion euros.

According to an estimate by the German Ifo economic think tank, German public debt is set to drop further from the post-financial crisis level of 82 percent of the country's gross domestic product (GDP) to 77.5 percent of GDP by 2014.

Next year, the government in Berlin also aims to contribute a bigger slice to debt reduction as it has proposed a 2014 budget which is structurally balanced.

uhe/hc (dpa, Reuters, AFP)

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