The Finance Agency in Germany plans to sell €92.5 billion in government debt in the second quarter of 2025, in line with the issuance plan released in December. 

According to a statement released on Monday, the agency will allocate €62.5 billion to bonds and €30 billion to bills while also planning to introduce green bonds at three locations, though their volume remains undisclosed.

The plan highlighted the country’s intention to borrow less money this year (by 13%) despite a struggling economy and pressure to assist Ukraine in fighting Russia.

Going into the elections, the administrations needed to divest securities with a total value of more than €380 billion, of which approximately €240 billion will be raised on the capital market, more than €120 billion on the money market and over €10 billion in Green Federal securities.

Following the announcement, the price of German bonds soared, but the interest rates on debt for the decade fell to around 2.22%.

The cost of borrowing rises as spending plans take shape

Ever since the leader of the Christian Democratic Union (CDU), Friedrich Merz, announced the deficit spending on the military and infrastructure, and the upper house of parliament approved it, all attention has been diverted to how the government will allocate these hundreds of billions of euros. 

But, this move could raise interest rates because the Finance Agency is also pushing more bonds into the market. According to economists, these higher interest rates could encourage some members of the European Central Bank to end their low-interest rate policies.

What’s more, if sovereign bond yields keep rising, housing loans and corporate credits will be more expensive, and it will take time before these sectors recover. Still, economists expect the spending to boost the country’s GDP by at least 2% in the long run.

Sale of debt to expand the military and fund infrastructure while maintaining fiscal discipline

The war between Russia and Ukraine created uncertainty all over Europe. It introduced security threats that forced many countries, including Germany, to try and strengthen their military by allocating more funds to it.

In addition to a strong defence system, the country also wants to improve its infrastructure, like transportation, energy, and digital networks, and the only way to make more money on a tight and debt-burdened budget is to sell federal debt. So the country can borrow well over its limit, the government proposed to exclude defence spending from limits set by the debt brake. 

The Finance Agency has also proposed a special €500 billion fund to expand infrastructure over the next decade, creating jobs and helping the country’s economy recover from the effects of high sovereign bonds. For this plan to succeed, the government must propose strict policies on allocating the funds and hold its lawmakers accountable for implementing it.

Cryptopolitan Academy: Coming Soon – A New Way to Earn Passive Income with DeFi in 2025. Learn More

Earn more PRC tokens by sharing this post. Copy and paste the URL below and share to friends, when they click and visit Parrot Coin website you earn: https://parrotcoin.net0

PRC Comment Policy

Your comments MUST BE constructive with vivid and clear suggestion relating to the post.

Your comments MUST NOT be less than 5 words.

Do NOT in any way copy/duplicate or transmit another members comment and paste to earn. Members who indulge themselves copying and duplicating comments, their earnings would be wiped out totally as a warning and Account deactivated if the user continue the act.

Parrot Coin does not pay for exclamatory comments Such as hahaha, nice one, wow, congrats, lmao, lol, etc are strictly forbidden and disallowed. Kindly adhere to this rule.

Constructive REPLY to comments is allowed