Coronavirus pushes Germany into biggest budget deficit since reunification

Lockdowns, bridging aid, Kurzarbeit and an overburdened healthcare system: the coronavirus pandemic has had a disastrous impact on Germany’s finances. For the first time in seven years, the federal republic is back in the red - and the size of the deficit is record-breaking. 

Germany records first budget deficit since 2013

Germany recorded a budget deficit of 189,2 billion euros in 2020, the Federal Statistical Office (Destatis) has revealed. “It is the first deficit since 2013 and the highest since German reunification,” the statisticians announced on Wednesday. In 2019, a surplus of 45,3 billion euros was achieved. 

According to new figures released by Destatis, spending by the federal and state governments, municipalities and social security funds increased by 12,1 percent in 2020 compared to 2019, to just under 1,7 trillion euros, as the state attempted to cushion the financial fallout of the pandemic. 

In total, the federal government paid out around 17,8 billion euros to the federal states, which was then passed on as coronavirus aid to small businesses and self-employed workers. Around 13 billion euros were allocated to the health fund, from which health insurance companies received money to finance treatments for their insured persons. 

State revenue fell as tax incomes dipped

At the same time, state revenue fell by 3,5 percent to around 1,5 trillion euros last year. The main reason for this was that income from taxation and tax-like charges fell by 3,8 percent.

“The federal government made up for this income deficit essentially by borrowing,” Destatis explained. In a nutshell, the federal government took on new debts to free up money that was then passed down to the federal states and municipalities. 

The spending spree looks set to continue. Last month, Federal Finance Minister Olaf Scholz pledged to do whatever was necessary - even if that meant taking on further debts - to enable Germany to spend its way out of the crisis.