Low Debt Levels Mean Germany Could Manage Lingering Shock

(Bloomberg) -- Bloomberg Economics estimates that Germany’s slump will cost the government 100 billion euros ($108 billion) as tax revenue falls away and cyclical spending increases. Add in policy measures to protect the economy and general government borrowing may jump by closer to 250 billion euros. That could open up a 6.4% budget deficit this year and prompt a 9-point leap in the debt-to-GDP ratio. If the economy rebounds, the debt ratio will fall back and, even in more severe scenarios that leave scars on the economy, the country’s low debt means the fiscal consequences of a lingering shock would be manageable.

©2020 Bloomberg L.P.