For the second time since 1979
Bundesbank is again not sending any money to Berlin
03/02/2022, 11:50 am
This year, too, the finance minister will wait in vain for a transfer from the Bundesbank: the Corona crisis will also leave major traces on the balance sheet in 2021. The grants for the federal government are only missing for the second time in over 40 years.
The Corona crisis also left clear marks on the balance sheet of the Deutsche Bundesbank last year: For the second time in a row, the transfer from Frankfurt was canceled for the Federal Minister of Finance, as the central bank announced. As in 2020, the Bundesbank achieved a balanced annual result in 2021 and therefore does not transfer any profit to the federal budget.
Bundesbank President Joachim Nagel justified this with the necessary further increase in risk provisions due to the emergency monetary policy measures in the wake of the pandemic. “Overall, in 2020 and 2021, the risks on our balance sheet have increased significantly compared to before the pandemic,” said Nagel. During the crisis, the European Central Bank (ECB) significantly expanded its purchases of government and corporate bonds. According to the Bundesbank, this increased the risk of default, which is why it increased its so-called risk provision by EUR 1.3 billion to EUR 20.2 billion.
Last year, Berlin did not receive a check from the Bundesbank for the first time since 1979. Before the Corona crisis, the federal government had traditionally planned a profit of 2.5 billion euros for the Bundesbank in its budget. The Bundesbank made the highest profit in 2001 with 11.2 billion euros.
In view of the war in Ukraine, the Bundesbank is expecting another surge in energy prices, which is likely to fuel inflation in Europe’s largest economy. “Meanwhile, the experts at the Bundesbank expect that the inflation rate could reach 5 percent on average for the year,” said Nagel. In February, the central bank assumed an inflation rate of four and a half percent according to the harmonized consumer price index (HICP), which is decisive for the ECB’s monetary policy.
“A high rate of inflation is also to be expected for the euro area,” Nagel continued. “We have to keep an eye on the normalization of our monetary policy.” Inflation is an important indicator for the monetary policy of the ECB.