The German Federal Government's interest burden

The Federal Republic of Germany accumulates debts by issuing government bonds. The current costs of government debt are almost completely measured by the interest payments for newly issued federal government securities and those in circulation. Over the course of the European debt crisis the interest rates for German government bonds have dropped significantly, because the ECB has pursued a very expansive monetary policy and investors now see Germany as a "safe harbor". This represents an enormous potential saving for the federal budget. If the federal government's future interest burden is modeled and the savings for the state budget generated by the present exceptionally low level of interest are illustrated, the results indicate that interest expenditure should continue to fall through 2014.