The report of the ministry of Finance, which shall be drawn up in… regular intervals and is entitled “debt sustainability Analysis” brings published in the Sunday edition of the newspaper Die Welt of Berlin.
According to the information of the newspaper, the report, which will be discussed next week at the ministerial council, talks about “significant risks”, as well as the demographic aging in Germany leads to unsustainable debt developments”.
The staff of the ministry have no other choice but to make estimates based on various possible scenarios: in the optimistic scenario, therefore, higher percentages of births in combination with corrective measures would be sufficient to keep the German debt in the region of 60% of GDP, as provided for in the stability pact. In the pessimistic scenario, however, the debt could reach up to 220% of GDP in the year 2060, if we maintain the current relationship of revenue and expenditure.
What is the solution? An obvious antidote, considers the report of the ministry of Finance, would be to grow the German primary surpluses every year by 1.2% of GDP in the most optimistic σÎνάÏιο to 3.8% in the most pessimistic.
This means that from 2016, and until further notice, the German government will have to cut expenditure by at least 7 billion euros per year or increases, respectively, in revenues. In fact, in the most pessimistic scenario, the fiscal adjustment would come the 23 billion a year.
Source
SOS for the German debt.
—