Record Debt after Coronavirus – What about the Burden on German Länder Budgets?

The coronavirus pandemic is forcing Germany’s federal states, or Länder, to respond with fiscal policy on a historic scale. A total of more than EUR 105 billion in new debt has been approved, mostly through the adoption of – in some cases several – supplementary budgets. Multiple German Länder have also set up special funds, which may lead to a lack of transparency. If the possible new debt is standardized to one year, the new credit authorizations in some states correspond to 30 percent of the 2019 budget volume. Favorable conditions have driven the consolidation progress that has opened up this room for maneuver. It is not certain whether the federal states will continue to have such conditions in the future.