Germany's total public debt reached €2.37 trillion (roughly $2.6 trillion) at the end of 2022 — a new record high — Federal Statistical Office (Destatis) announced on Wednesday.

The level of debt corresponded to a 2% — or €46.1 billion — rise from the end of 2021, when the coronavirus pandemic was still in full swing.

According to Destatis, the national public debt has reached the equivellent of €28,155 per person in Germany.

Federal debt was up 4.6%, or €71.9 billion, to a total of €1.62 trillion. 

"This is above all due to the continued high funding needs in light of the pandemic over the past years and the current energy crisis," the statistical agency said.

The rate of increase was also reduced in 2022 compared to 2021 and 2020, amid the most pronounced COVID-related disruptions.

Germany's increased interest obligations

Total public debt consists of borrowing on various levels: federal, state and municipality.

While federal and municipal debt levels were up by the end of 2022, all but one of Germany's 16 states had lowered their debt obligations, by a total of 5% — €31.7 billion. Only the eastern state of Saxony-Anhalt clocked up more debt.

Although public debt has little in common with private household debt, rising debt can cause problems due to the increase in interest payments.

"The debt burden means higher interest payments which take up an increasing share of the annual budget meaning that money is then missing for meaningful spending or investments," chief economist at ING bank Carsten Brzeski told Reuters.

Where is the debt increase coming from?

Much of the increase in borrowing in recent years was to fill up a special coronavirus fund which was then extended to act as an energy fund as the energy crisis hit following Russia's invasion of Ukraine.

The coronavirus special fund had amounted to debts of €52.4 billion by the end of 2022, at the same time debts in the energy fund exceeded €30 million for the first time.

Another special fund was also announced last year to modernize the German Bundeswehr with a credit allowance of €100 billion, although this had not yet been used by the end of 2022.

ING's Brzeski pointed to higher levels of debt in other eurozone countries, saying that Germany "can still afford it."

But he warned that "the increase is a clear sign that the special asset funds are not assets at all, but rather simply additional debts."

ab/msh (Reuters, dpa)

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