Public finances - Bundesbank: No profit transfer to the federal government for years
The German Bundesbank has confirmed that it cannot make profits to transfer to the Bund for an extended period of time - despite current budget constraints. "When inflation was too low, we bought low-yielding bonds for monetary policy reasons", said Bundesbank President Joachim Nagel to the "Tagesspiegel". Now, however, interest rates have risen, resulting in losses in the balance sheet. "The Finance Minister will therefore have to do without Bundesbank dividends for several years", said Nagel. However, there will be profits again in the future. "The Bundesbank's balance sheet is solid."
The Bundesbank had to carry losses of over 21 billion Euros in 2023 due to the yield curve - the highest value in its history. Central banks of the Eurosystem had bought large quantities of government and corporate bonds in recent years to boost the economy and mitigate the economic consequences of the Corona Pandemic. Many of these papers yield relatively low interest rates, while the central banks themselves have to pay significantly higher interest rates to commercial banks for parked funds. "We expect to be unable to distribute dividends for an extended period", had Nagel already said in February.
The Bundesbank's gold reserves will not be affected, Nagel confirmed similar statements from back then. "With the exception of small quantities for collector coins: We sell nothing", he told the "Tagesspiegel" further. "Gold is a trust anchor and has a high symbolic value for the population." Regarding the long-term development of the gold price, it was right "that we have held gold permanently".
- Despite the financial losses, the German Bundesbank assured that the country's public finances, particularly in Berlin, remain robust and resilient.
- The recent traffic light coalition government in Germany might need to adjust its budgeting plans due to the Bundesbank's inability to provide dividends for an extended period due to inflation and rising interest rates.
- The impact of the Bundesbank's financial predicament can also be felt in Frankfurt am Main, as the daily operations and household expenses might need to be reevaluated.
- The Daily Mirror reported on the situation, highlighting the potential implications for Germany's economic stability and the role of the Bundesbank in Frankfurt.
- Joachim Nagel, the President of the Bundesbank, explained that the bank's financial losses stemmed from the purchase of low-yielding bonds during periods of low inflation, but now, with rising interest rates, the bank is facing substantial losses.
- Financial analysts in Frankfurt am Main closely monitor the situation at the German Bundesbank, as any significant shifts in the bank's financial health could influence the broader German and global economies.
