The model of public debt management in Germany

Mariia Mygal

With each passing month of the war, our country is sinking deeper into debt dependence on international financial organizations.

According to the Government’s forecasts, the maximum amount of public debt in 2023 will reach a record UAH 6.406 trillion and even slightly exceed the country’s GDP – 100.1% of GDP.

To ensure that the level of public debt does not impede Ukraine’s recovery, development, and living standards, an effective debt management strategy needs to be developed. To this end, we have studied how public debt is managed in foreign countries and identified the experience that can be adapted to Ukraine. 

Today, we will look at the debt management model in Germany, where Covid-19 has tested the country’s economy. 

How is Germany overcoming the economic crisis caused by the pandemic?

In Germany, the Financial Agency is responsible for managing public debt, loans, and cash. 

The institution manages the debt portfolio by issuing government securities and conducting money market operations. The main goal of German debt management is to keep interest costs as low as possible.

One of its responsibilities is to develop new financing instruments to create efficient ways to borrow money. Recent innovations in the capital market have included the issuance of US dollar-denominated federal government bonds and green securities. 

Current state of German public debt

Today, Germany is a leading economic power in Europe with a developed industry and all types of transportation. 

For a long time before the pandemic, Germany saw a continuous decline in the debt-to-GDP ratio, with the ratio standing at 59.7% at the end of 2019. 

This gave citizens hope for living in a financially stable country. That was until the coronavirus pandemic hit the world like a tsunami. 

In the second year of the coronavirus pandemic, Germany’s public debt increased by EUR 162 billion to EUR 2.476 trillion. The debt-to-GDP ratio rose to 69.3% and significantly exceeded the Maastricht Treaty benchmark of 60%.

The lion’s share of the increase in debt was due to the state budget deficit of €132 billion. As a result, the debt-to-GDP ratio was expected to rise to 74% in 2021 and continue to decline until 2025. 

To strengthen the German economy after the pandemic, the government launched the Economic Stabilization Fund. This institution is also managed by the Financial Agency.

At the same time, the German federal government issued green federal securities for the first time, which began to gain supporters in Europe. They are always issued with the same characteristics as conventional federal securities. However, the volume of their issuance will be much smaller. 

One of the measures taken by the world to respond to the acute liquidity problems during the COVID-19 crisis was the German government’s joining the G20 countries in adopting the Debt Suspension Initiative (DSSI). It provided for the freezing of debt payments for 20 months for 77 of the poorest countries. By postponing interest and principal payments, the DSSI provided debtor countries with greater financial flexibility for a limited period to allow them to invest, for example, in health care. 

In addition, the G20 adopted the Common Debt Framework beyond the DSSI to be able to respond appropriately to the solvency problems faced by developing countries.


Germany has an agency model of public debt management (a separate entity/agency chooses the most optimal methods of public debt management). 

The state of the country’s economy was significantly affected by the Covid-19 pandemic, when Germany’s public debt reached a record level. 

A key role in overcoming the crisis was played by the fact that for a long time before the pandemic, Germany had seen a continuous decline in debt relative to GDP. This helped Germany to respond decisively to the challenges of the pandemic without jeopardizing the stability of the overall government. 

What measures has Germany taken to stabilize the economy? 

  • creation of the Economic Stabilization Fund;
  • issuing green bonds;
  • joining the G20 countries in adopting the Debt Suspension Suspension Initiative (DSSI) to help the poorest countries, including Germany’s debtors, overcome the consequences of the pandemic; 

Thus, thanks to its institutional model of public debt management, relatively low debt-to-GDP ratio for a long time before the pandemic, and the issuance of green bonds, Germany managed to respond decisively to the challenges of the pandemic.

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