More bonds for bailouts
June 26, 2012
Europe's biggest economy will have to take on more debt than originally planned, Germany's Federal Finance Agency admitted on Tuesday.
It said it would issue a total of 71 billion euros ($89 billion) in fresh borrowing from July to September, three billion euros more than first envisaged. The agency argued the move had become necessary to meet the financial requirements of the planned European Stability Mechanism (ESM), a permanent rescue fund for ailing economies on the continent.
"Due to the increase of the net borrowing requirement decided with the supplementary federal budget, Berlin will adjust its issuance program in the third quarter of 2012," the Federal Finance Agency said in a statement.
To secure the necessary funds, Germany will issue 21 billion euros in short-term bonds and another 50 billion euros in long-term bonds with a maturity of up to 30 years.
Germany's 2012 contribution to the ESM amounts to 8.7 billion euros. The overall budget deficit will thus reach 32.1 billion euros this year, compared with the initial forecast of 26.1 billion euros.
Europe's economic powerhouse will have no problem placing more sovereign debt as investors consider Germany to be a safe haven amid the current eurozone debt crisis.
"The consequence of this is that yields on all such bonds have hit unparalleled lows in recent months," the head of the Federal Finance Agency, Carl Heinz Daube, told Reuters.
hg/ncy (AFP, Reuters)