German saving records

The German state is awash with money. According to the German Federal Statistics Office, last year the surplus in the public coffers more than doubled. It increased, as defined in the financial statistics, from around EUR 26 bn in 2016 to just EUR 62 bn last year. Even though this is somewhat lower when based on the calculation used in the national accounts, which is relevant for the Maastricht criteria, Germany’s central government, federal states and local authorities have not been in such good financial shape for a very long time.

Last year was already the fourth consecutive year with a government budget surplus. This leaves Germany pretty much alone on the international stage – at least as far as the larger countries are concerned.

Germany’s national budget benefits here above all from two factors: tax revenues are abundant thanks to the economic boom, which bolstered total public sector revenues by 5.8 per cent in 2017. At the same time, low interest rates curbed debt-servicing expenses, so public spending increased by only 3.1 per cent in 2017.

Not only the German state returned a surplus, the private sector has also been able to reduce its debt ratios in the last few years. The national financial accounts show that revenues exceeded expenditures every year not only at the private households, which are traditionally the biggest net savers in an economy. Germany’s (non-financial) companies have also become net savers in the last few years.

The fact that the companies have also moved into the savers’ camp is not completely unproblematic here: on the one hand, it is apparent that the propensity to invest is not particularly pronounced despite the robust economy and good capacity utilization. On the other hand, it means that there are no longer any domestic takers for savings capital: the state, the private households and the companies, in other words all major economic sectors, are accumulating surpluses, which in line with the principles of the balance of payments have to go abroad.

Not only does this leave Germany under political pressure on account of its high current account surpluses, but it is also becoming increasingly dependent on political and economic developments at its most important international debtors.

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