General government debt in Germany increased by €162 billion in 2021 to €2.476 trillion. This was largely a result of government support measures in the second year of the pandemic. The debt ratio, meaning the ratio of debt to gross domestic product, rose from 68.7% to 69.3%.

Bundesbank President Joachim Nagel has warned of persistently high inflation. “Even before the war against Ukraine, the inflation rate was very high. [...] Given the surge in energy prices on account of the war, consumer price inflation is likely to pick up again substantially, particularly in the near term,” Mr Nagel said in a speech delivered at a change of office ceremony in Hanover. As members of the ECB Governing Council, he remarked, we must now ensure that the strong inflation does not become entrenched and does not lead to excessively high inflation in the medium term.

2021 saw Germany’s current account surplus rise by €26½ billion to €265½ billion. The balance grew by ½ percentage point to 7½% of gross domestic product. The ratio thus more or less returned to its pre-pandemic level, after the short-lived decline in the previous year.

“The impact of Russia’s attack on Ukraine is likely to place a noticeable strain on economic activity in Germany from March,” the Bundesbank writes in its Monthly Report. Energy commodity prices have surged which will probably put a damper on household consumption and the production of energy-intensive industries. Together with the looming disruptions to foreign trade and supply chains and the heightened uncertainty, the consequences of the war are likely to slow the economic recovery originally expected by a significant degree.

The European Central Bank (ECB) and the Deutsche Bundesbank lended their support to a concert promoting peace organised by the Berlin State Opera together with its orchestra and choir under the musical direction of Daniel Barenboim. The concert, attended by  Bundesbank President Joachim Nagel and the entire Executive Board, took place in Berlin on Sunday, 6 March 2022. The ECB, the Bundesbank and other Eurosystem central banks are supporting the charity campaign with their own donations.

As in 2021, the Bundesbank is unable to transfer any profit to the Federal budget this year. One key reason for this was the need to further increase the Bank’s risk provisions, Bundesbank President Joachim Nagel explained. “In the years 2020 and 2021, the risks on our balance sheet increased substantially overall compared with the pre-pandemic period,” he said. Commenting on the war in Ukraine, the Bundesbank President expressed his shock. “Our thoughts are with the people in Ukraine and the suffering they are enduring under this aggression.”

The Bundesbank condemns the war of aggression against Ukraine. As a symbol of solidarity, we have raised the Ukrainian flag in front of our building in Frankfurt city centre. Our thoughts are with the children, women and men in Ukraine.

According to the current issue of the Bundesbank’s Monthly Report, consumer prices in Germany and worldwide are continuing to rise extraordinarily sharply. While Germany’s economy remains in the grip of the Omicron variant, very robust demand is likely to see GDP “rebound strongly in the second quarter, provided the pandemic subsides and the supply bottlenecks continue to ease,” write the Bank’s experts. 

House prices in German towns and cities rose by 7% in 2021, which was a somewhat brisker rate of growth than in 2020.

Members of the European System of Central Banks (ESCB), including the Bundesbank, have renewed their Statements of Commitment to the FX Global Code. The Code, which aims to promote a robust, fair, liquid, open and appropriately transparent foreign exchange market, was updated and expanded in July 2021. According to an ECB press release “With these Statements of Commitment, the members of the ESCB emphasise that the principles of the Code are important in ensuring the continued integrity and effective functioning of the foreign exchange market.”