The Bundesbank Reports a Loss of Billions. For the first time in its history, the bank has recorded a loss of 19.2 billion euros for the year 2024, a figure that has never been seen before.
What is new is that the bank’s past losses have always been offset by its own reserves. This is no longer the case and the losses will have to be carried over to future years. For the federal government, this means that it will have to forgo the expected profits from the German Bundesbank in the federal budget for the coming years. The bank’s president, Joachim Nagel, stated that “profit transfers to the federal government will fall out for a longer period.”
The reason for the loss is the European Central Bank’s (ECB) monetary policy. The ECB kept interest rates very low for a long time and in some cases, even made banks pay negative interest rates on their deposits at the central bank. The Bundesbank also bought government bonds with long maturities at extremely low interest rates. Now that the ECB has raised interest rates, the Bundesbank must pay higher interest rates to commercial banks, but without receiving any corresponding income.
For the Bundesbank, this is not a problem, as it can create an unlimited amount of money as part of the European central banking system, even though Germany no longer has its own currency in reality. However, it will not contribute to plugging the budget holes of the federal government in the coming years. The government has big plans, aiming to modernize extensively without incurring higher debt or introducing new taxes, as promised by Friedrich Merz. It remains to be seen what is left of these promises in the coming months.