If there is an institution with which people connect the “good old days” who are popular in Germany, then it is probably the Bundesbank. There were rarely bad news from the currency huts. But now the Bundesbank has to balance a double -digit billion loss loss for 2024. The minus is 19.2 billion euros. Red numbers are also expected for the next few years, albeit less deep red than now. “The highlight of the annual burdens should have exceeded,” said Bundesbank President Joachim Nagel on Tuesday when the annual financial statements were presented.
The last loss of currency keepers goes back to 1979, at that time dollar reserves had to be re -evaluated. Now it was due to the toxic melange of relaxed monetary policy and bond purchases during the years in which Mario Draghi was ECB president. In addition, there was a rapid increase in lead from 2022 to the beginning of 2024. As early as last year, the Bundesbank had reported the highest loss of its history with 21.6 billion euros, but this shortfall could still be collected by the dissolution of loss reserves. For the Bundesbank, this was and is the price to be done for the “right monetary policy”, as Nagel said.
Nagel wants reform of the debt brake
The Bundesbank President puts pressure for quick coalition formation after the Bundestag elections on Sunday. “Germany needs an effective government as soon as possible.” A significant economic upswing is not in sight. “Even a third year without an upswing cannot be ruled out,” said the Bundesbank President. Germany's economy has been in a recession for two years and is currently discussing how the necessary investments can be paid. There is also a reform of the debt brake. The Bundesbank plans to present a reform proposal in early March. “We would like to anchor the stability instrument in it, but also create more scope for possible future investments, for example in the defense area,” said Nagel. “We are in a different environment than 15 years ago when the debt brake saw the daylight,” said the Bundesbank boss. He sees it as a duty by the Bundesbank to make this proposal and demands that the politicians are “read” carefully “.
It is rare that the monetary keepers in this form in this form – and underlines the seriousness of the situation in which Germany is located. The Bundesbank should be politically independent in order to concentrate on its core task, the fight against inflation. But Nagel probably does not want to leave anything to be untried to lift the central bank competence into parliament: “It's five to twelve,” he said. Nagel believes that Germany will be able to finance the tasks through the national budget, and he does not consider it necessary to agree to debt at EU level.
Billions losses in the next few years
The Bundesbank will also be accumulating further billions in losses in the next few years. But that is more of a bad luck, because of bad management. In view of the increasing inflation rates, the ECB raised the key interest rates from zero to four percent from July 2022. Four percent that the central bank had to pay for the commercial banks, on their surplus reserves, which have been on the central bank since the euro debt crisis.
Review: Under the leadership of the then ECB President Mario Draghi, the Euro system started a trillion-heavy bond buying program for stabilizing the economy in 2015. The Bundesbank bought German government bonds from the large commercial banks and wrote the banks the purchase price on their checking accounts at the central bank. For this money, the banks receive income level at the level of key interest rates. This has now dropped to 2.75 percent, the interest payments due are still higher than the income that the bank generates through government bond purchases.
It is therefore clear that the next federal government cannot expect any money from the Bundesbank, even if profit will be generated again soon. Because with these any surpluses you want to reduce the loss of billions in losses until then. “Promotional distributions to the federal government are not in the room for a long time,” said Nagel.
Apart from the current losses, Bundesbank has a solid balance sheet, as there is evaluation reserves of 267 billion euros in the gold stock. This amount lies many times higher than the current and the expected losses. Historically, the Federal Ministry of Finance was able to plan an annual Bundesbank profit of 2.5 billion euros on average, in 2019 it was even 5.9 billion euros. That was the last distribution so far, because the winnings of the following years have already been covered as a loss buffer.
