Germany: the Bundesbank on the edge of the abyss with a historic record deficit

The Germans went to the polls on February 23, redrawing the country's political landscape. With the victory of Christians Democrats (CDU/CSU) and the remarkable ascent of the extreme right, attention turns to the major economic challenges of the future government. Among them, a new shattering: the Bundesbank recorded a record loss of 19.2 billion euros in 2024, a financial chasm which will weigh heavily on the budgetary choices of Friedrich Merz.

A German economy under tension

Germany, formerly an economic locomotive of a Europe in crisis, is today to Serious signs of weakness. After two years of recession, companies alert on a loss of competitiveness and a decline in exports. The increase in interest rates of the ECB, initially intended to control inflation, amplified the difficulties of central banks.

Result : The Bundesbank must pay higher interests To commercial banks, while its income from obligations fall.

• The loss of 19.2 billion euros in 2024 is the largest since 1979;
• In 2019, the Bundesbank paid still 5.85 billion euros to the state;
• Other losses are planned for the coming years, according to its president Joachim Nagel.

Companies did not take off. They demand a drastic drop in energy costs and bureaucracy. But will the Merz government give them satisfaction while respecting budgetary constraints?

Friedrich Merz facing the budget puzzle

THE Future Chancellor Friedrich Merz is not a novice of finance, but he has never exercised a ministerial post. The strong man of the CDU is a former BlackRock executive, which feeds criticism on his connivance with the banking sector.

“” Friedrich Merz comes directly from BlackRock, without any government experience. He was chosen to direct one of the most influential nations in Europe. “, Denounces an observer on social networks.

The challenge is immense: while The CDU pleads for a lower taxes and a return to nuclear powerits potential allies of the coalition, in particular the Greens, advocate a heavier taxation and a radical ecological turn.

As for the SPD, he wishes a fund of 100 billion euros to finance the industrial transition. But how can we finance these projects without the Bundesbank revenues and under the constraint of the debt brake?

The other big factor of uncertainty comes from the other side of the Atlantic. With the Return from Donald Trump to the White HouseGermany fears new taxes on its exports for Europe. Trump wants to reduce the American trade deficit and encourage German companies to relocate their production in the United States.

Does a new economic storm are looming for Berlin?

A systemic crisis in gestation

Is Germany condemned to economic weakening? In addition to the banking crisis and the American protectionist threat, theGerman companies are struggling to find qualified workers. Cherry energy, over-regulation and social security weight weigh on industrial competitiveness.

“” The economy contracts. Unemployment increases. Germany no longer attracts investors “, warn Rainer Dulgerpresident of the Confederation of German employers.

Faced with this situation, a group of 100 economic associations launched A Politician SOSorganizing a demonstration in Berlin on January 29. They demand a deep reform to revitalize the economic fabric. Among their claims:

• A massive reduction in bureaucracy;
• A drop in business taxation;
• Incentives for investment;
• A reduction in wage costs.

But the room for maneuver of the future government remains reduced. Between the Budget discipline imposed by the ECB And the pressure of European partners, Berlin may have to make painful choices. Do you have to soften the debt brake to relaunch the investment, even if it means displeasing the conservatives?

One thing is certain: the “locomotive of Europe” needs a real boost. But who will dare to press the accelerator?

Note that this is not the first time that Germany has seen black clouds are piling up on its economic horizon. Already last August, some mentioned the specter of a recession, alerted by the fall in exports. Today, the question is no longer whether Germany vacillates, but how far it will fall before rebounding.