German government deficit several billion larger than expected

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Bundestag in Berlin

Photo: Chris Emil Janssen / Chris Emil Janßen / IMAGO

The deficit in the German state budget was larger last year than previously expected.

Federal, state, local and social security spending exceeded revenue by 87.4 billion euros, the Federal Statistical Office announced on Friday.

An initial estimate in January only showed a loss of 82.7 billion euros.

The new result corresponds to a deficit ratio of 2.1 (previously: 2.0) percent of gross domestic product, which once again remained below the EU upper limit of three percent.

“The deficit therefore remained high,” emphasized the statisticians.

However, it was 9.5 billion euros lower than in 2022. The reason: the state's income rose by 4.4 percent to 1,901.8 billion euros, more strongly than expenditure, which rose by 3.7 percent to 1,989.2 billion euros increased.

Due to record employment, social contributions increased by 6.6 percent.

Tax revenue, on the other hand, only grew by 0.7 percent.

“In addition to the weak overall economic development, this was also due to extensive relief for citizens and the economy,” it said.

These included, among other things, relief in the form of the Inflation Compensation Act, inflation compensation bonuses, the reduction in the sales tax rate for gas from 19 to seven percent and the extension of the reduced VAT rate for food in restaurants until the end of 2023. The state's interest expenses rose by 36.2 as a result of increased key interest rates Percent.

New debt could fall

The new debt is primarily due to the federal government, which reported a financing deficit of 79.0 billion euros.

However, expiring measures in connection with the corona pandemic and the energy crisis ensured that the minus this time was 45.3 billion euros smaller than in 2022. Declining federal transfers combined with ongoing financial burdens to provide for those seeking protection contributed to the fact that in Last year, the states (6.4 billion euros) and municipalities (12.1 billion euros) were also in the red.

In 2022 they still achieved surpluses.

The social insurance funds (10.0 billion euros) recorded a slight increase in the financing surplus in 2023.

Most experts expect new debt to continue to fall this year, also because of the federal government's fun measures following the Federal Constitutional Court's ruling on the debt brake.

The high prices and wage agreements are also likely to increase tax revenue.

hey/Reuters