Unpleasant legacy for Lindner: Scholz and Schäuble speculated on inflation

The federal finance ministers of the Ampel predecessor governments apparently gambled massively when borrowing for the federal government.

Unpleasant legacy for Lindner: Scholz and Schäuble speculated on inflation

The federal finance ministers of the Ampel predecessor governments apparently gambled massively when borrowing for the federal government. This will be expensive for the taxpayer.

The bet went well for years. As finance ministers, Olaf Scholz and Wolfgang Schäuble launched government bonds linked to inflation. In times of notoriously low price increases, this is a great thing. But when inflation shoots up, things look very different.

Her successor Christian Lindner and the traffic light coalition are now feeling the effects of this. According to an estimate by the European statistics agency Eurostat, inflation in Germany was 8.2 percent in June. For the year as a whole, the EU Commission expects an inflation rate of 7.9 percent. To put this in context: from 2010 to 2020, prices rose by an average of 1.3 percent annually.

According to the editorial network Germany (RND), Germany will have to pay almost twice as much interest next year, at 30 billion euros, because the federal government has issued inflation-linked bonds. The basis for the interest is the "unrevised harmonized consumer price index (HICP) excluding tobacco", which is determined by Eurostat.

According to the RND, the Federal Finance Agency, which takes on the debt for the federal government, has issued inflation-indexed federal bonds totaling around 65 billion euros. That corresponds to almost five percent of the total federal debt of around 1.5 trillion euros. However, the proportion of total interest expenditure is 25 percent.

The RND relies on internal documents from the Federal Ministry of Finance for the 2023 budget draft. According to this, 7.6 billion euros have to be set aside for the repayment of inflation-linked bonds for the next year. That is 3 billion euros more than in the current year and almost 7 billion euros more than in 2021, it said. In previous years, only amounts in the order of one billion euros were necessary.