The Burden of Corona Debt - What Burdens Will Federal State Budgets Face in the Coming Years?

The German federal states have approved credit authorizations of around 116 billion euros by mid-December 2020 in response to the Corona pandemic. The German federal states not only differ greatly in terms of the amount of the credit authorizations, but also in the corresponding plans for repaying the credits. The planned repayment periods range from less than ten to a maximum of 50 years. Saxony in particular faces considerable spending constraints in the coming years, with annual repayments of just under five percent of planned spending in 2020. A projection calculation shows that most federal states are likely to return to their 2019 debt-to-GDP ratios within the next five to ten years. However, the main driver here is economic growth rather than repayments. Thus, there does not appear to be any immediate threat to the sustainability of federal state budgets from the borrowing authorizations adopted so far, provided that the economy quickly returns to its pre-crisis growth path.