German government achieves record surplus in 2017

According to the updated figures of the Federal Statistical Office (Destatis), Germany’s public finances recorded a financial surplus of €36.6 billion in 2017, making it the highest general government surplus since German reunification. When measured as a percentage of gross domestic product (GDP), this yields a surplus ratio of 1.1%, Destatis reported in its press release. In 2016, the general government’s surplus had amounted to €25.7 billion.

Net general government lending is derived from the difference between revenue (€1,474.6 billion) and expenditure (€1,438.0 billion). Revenue was higher than expenditure at all levels of government – which include central, state and local government as well as social security funds – Destatis stated in its press release. According to its figures, the largest surplus in 2017 was achieved by state governments at around €16.2 billion. In absolute terms, state governments were able to improve their financial situation by the greatest margin compared with the other levels of government. According to the press release, social security funds concluded 2017 with a surplus of around €10.5 billion, while the surplus for local governments amounted to just under €8.8 billion. Central government generated a surplus of around €1.1 billion last year, Destatis noted. This was significantly lower than in 2016, when it had amounted to €7.4 billion.

According to data from Destatis, the comparatively small surplus of the central government was due mainly to the implications resulting from the ruling of the Federal Constitutional Court, which declared that a nuclear fuel tax imposed by the government was unconstitutional. This resulted in repayments being made to energy companies in the amount of around €7.3 billion. Central government revenue from interest and distributions received also declined, falling by 6.3% compared with 2016.

Bundesbank profit lower in 2016 owing to increased risk provisions

The distributions also include the Bundesbank’s profit, which arises primarily from interest income from loans to commercial banks and interest on assets held by the Bundesbank and which flows into the central government budget. For 2016, the Bundesbank had reported a balance sheet profit of €0.4 billion, which it transferred to the Federal Ministry of Finance in February 2017. The Bundesbank's profit was therefore significantly lower than in 2015, when it had stood at €3.2 billion. This decline was due mainly to an increase in the Bundesbank’s risk provisions. The interest rate risk to which the Bundesbank is exposed has soared owing to its growing stocks of assets resulting from the Eurosystem’s purchase programmes, Mr Weidmann said in February 2017.

The Bundesbank’s profit for 2017 arises from the annual accounts, which will be presented together with the Annual Report by Bundesbank President Jens Weidmann and Executive Board member Carl-Ludwig Thiele on 27 February 2018. The entire press conference will be streamed live on the internet from 11.00.