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Frankfurt am Main | 04.05.2018

Bundesbank: Compliance with Maastricht criteria soon to be restored

During the financial and sovereign debt crisis, Germany's debt and debt ratio reached all-time highs. Given the very favourable macroeconomic developments and budget position, the Bundesbank's economists expect Germany to return to compliance with the Maastricht debt limit of 60% of gross domestic product (GDP) by 2019 at the latest (see the box for information on the Maastricht criteria). In order to better meet the European requirements for the scope and quality of data, which have increased since the financial crisis, the Bundesbank's experts make the case for a more harmonised and integrated accounting system for general government in the current issue of the Monthly Report.

Strong increase in debt driven by German reunification

Level and structure of general government debt [+] Level and structure of general government debt Figures for Germany's Maastricht debt are available from 1991 (see the chart). Bundesbank data show that the Maastricht debt of Germany as a whole that year came to €618 billion, and the debt ratio to 39%. In particular, the financial burdens associated with German reunification drove debt up to €1,239 billion by 1999, and the debt ratio to 60%.

Thanks, not least, to the substantial proceeds generated by UMTS auctions, the debt ratio fell to 58% by 2001, the authors note. Consistently high deficits subsequently accelerated debt growth until the mid-2000s and led to Germany significantly exceeding the 60% limit from 2003. In the second half of the decade, absolute debt growth initially slowed on the back of a considerable general improvement in the economy and declining deficits.

2010: peak debt ratio of 81%

According to the current issue of the Monthly Report, from 2008, debt movements were shaped by the fallout from the financial and sovereign debt crisis, the government measures to support the financial market that were implemented during the crisis, as well as assistance loans granted to euro area member states. Figures provided by Bundesbank economists show that the most significant rise in debt was caused by FMS Wertmanagement, a state-owned "bad bank", taking on toxic assets from Hypo Real Estate. This contributed €189 billion to Maastricht debt for 2010, representing 7½% of GDP. The debt ratio consequently peaked at 81%. Debt amounted to €2,088 billion, of which, according to Bundesbank figures, €306 billion (12% of GDP) was attributable to support measures for financial institutions.
The next few years saw the start of the liquidation of financial assets acquired as a result of the crisis and the repayment of granted capital aid. The authors note that, although these measures in and of themselves reduced debt, at the same time, Germany granted assistance loans to certain euro area countries during the course of the sovereign debt crisis. The article states that, overall, this caused a further net increase in debt: "In 2012, absolute debt reached an all-time high of €2,202 billion." The debt ratio was 80%. "At the same time, the burdens it contained as a result of the financial and sovereign debt crisis also reached their peak at a total of €360 billion." However, only a small portion of this was reflected in the deficits. In their article, the Bundesbank's experts provide an in-depth explanation of the causes of the differences between the deficit and the change in the debt level.

Maastricht debt soon to be back down to 60% reference value

From 2013, the underlying debt trend also decreased in absolute terms. The very favourable budgetary situation, which included surpluses, contributed to this. Strong GDP growth caused the debt ratio to decline even more significantly. According to the Bundesbank, debt at the end of 2017 was €2,093 billion, which corresponded to a ratio of 64.1% of GDP. Of this, the effects of the financial and sovereign debt crisis amounted to €282 billion, or 8½% of GDP.

Experts expect that the Maastricht debt ratio will continue to decrease considerably over the next few years due to the favourable outlook and strict national debt brake. They believe that it will fall below the reference value of 60% by 2019 at the latest, with the "bad banks" also likely to make further progress in portfolio deleveraging.

Heightened requirements call for better reference data

Although the debt dynamics are favourable, statisticians have been faced with substantial challenges for some time now. The authors write that, as a particular consequence of Greece's serious misreporting of data, the statistical reporting obligations, the requirements with regard to the underlying government accounting systems and the monitoring by the EU's statistics agency Eurostat were intensified considerably.

Overall, they continue, Germany's existing budgetary and public finance statistics systems, on the basis of which Maastricht debt is calculated, are well established and largely provide a reliable picture of single-entry accounting, which traditionally prevails in the country's public administration. The data that are required at the European level cannot always be readily extracted from the existing systems, however. Moreover, the Bundesbank points out that the required information has to be collected from very different accounting systems; for instance, the option sometimes exists of choosing between double-entry and single-entry bookkeeping. In some cases, statisticians additionally use indirect data sources that primarily serve other purposes and may not be consistent with the main accounting systems. The Bundesbank's experts conclude that the European-level obligations that Germany entered into have not been sufficiently accompanied by adjustments to the national public accounting system. In their view, it would make sense to aim for "a more harmonised accounting system across general government that depicts revenue and expenditure flows with balance sheet stock data in an integrated way". At the very least, however, the existing accounting systems need to be adapted such that European and international data needs can be met.

Additional information

 

The Maastricht criteria

Under the Maastricht Treaty, the general government deficit and general government (gross) debt are the key components of the European fiscal rules, which state that the general government fiscal deficit and general government debt must not exceed 3% and 60% of GDP respectively. In Germany, the Federal Statistical Office calculates the "Maastricht deficit", while the Bundesbank is responsible for calculating "Maastricht debt". The member states are required to calculate these reference values according to the European System of Accounts (ESA) – rules that are uniform throughout Europe – and report them to Eurostat twice a year.


Maastricht debt encompasses loans, debt securities issued and deposits received as well as liabilities arising from coins in circulation. To calculate Maastricht debt according to the ESA, a great many additions and transfers have to be performed against the source data of the national debt statistics. Use is also made of a number of other data sources, special surveys and model calculations. In their Monthly Report article, the Bundesbank’s experts explain in detail how Maastricht debt is derived on the basis of public finance statistics.