December 18, 2018 / 9:06 AM / a month ago

German government to borrow more in 2019 than this year

BERLIN (Reuters) - The German government will borrow more money in 2019 than it did this year, the finance agency said on Tuesday, pointing to its future role in issuing debt for a bad bank and the need to repay old debts.

Excluding inflation-linked debt, the agency plans to issue 199 billion euros ($226.22 billion) of debt in 2019, the agency said in a statement. That compares with 173 billion euros this year.

The agency said the main reason for the increase was that it will, from next year, take on the refinancing on the euro-denominated capital markets for FMS Wertmanagement, the bad bank of nationalized Hypo Real Estate (HRE).

The idea is that interest costs can be reduced this way because the agency issues many more bonds on the market and has the highest credit rating.

A total of 20 billion euros is to be raised, but this will not increase the federal government’s debt pile because HRE was nationalized.

The agency needs to take on more debt despite an expected budget surplus because it has to repay old debt - some 163 billion euros need to be paid back to creditors in the coming year and the government does not have these funds from current revenues so it has to take on debt.

The German government will post a budget surplus of more than 10 billion euros this year, the Handelsblatt business daily reported on Monday, citing government sources.

The finance agency generally builds a buffer in and sometimes revises its debt issuance plans later in the year.

The agency said it planned to issue 156 billion euros in longer-term nominal capital market instruments and 43 billion euros in money market instruments. It added it would also issue between 6 and 10 billion euros in inflation-linked securities.

Reporting by Michelle Martin and Rene Wagner; Editing by Madeline Chambers and Maria Sheahan

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