Press release No. 082 of 24 February 2021

WIESBADEN – The corona crisis led to a financial deficit (net borrowing) of general government in 2020, amounting to 139.6 billion euros, according to provisional calculations of the Federal Statistical Office (Destatis). It was the first deficit since 2011 and the second highest deficit since German reunification and was exceeded only by the record deficit in 1995 when the debt of the Treuhand agency was integrated in the general government budget. When measured as a percentage of gross domestic product (GDP) at current prices, the deficit ratio was 4.2% in 2020. This means that the 3% reference value of the European Stability and Growth Pact was clearly exceeded. However, applying it has been suspended for 2020 and 2021.

The results are based on the definitions of the European System of Accounts (ESA) 2010. They form the basis for monitoring the budget situation in the Member States of the European Union (EU) in accordance with the Stability and Growth Pact (Maastricht criteria).

Revenue down 3.0%, expenditure up 9.3% on 2019

The financial deficit (net borrowing) in 2020 is the difference between general government revenue, which decreased by 3.0% to 1,563.0 billion euros on 2019 (2019: 1,610.6 billion euros), and expenditure, which increased by 9.3% to 1,702.6 billion euros (2019: 1,558.1 billion euros).

Central government recorded the highest financial deficit (86.6 billion euros)

The good initial fiscal situation from 2019, when all subsectors of general government recorded a surplus, deteriorated - in part drastically - in 2020 during the corona crisis. Especially the financial balance of central government deteriorated substantially by over 100 billion euros, reaching -86.6 billion euros. Social security funds showed a deficit of 33.7 billion euros, and state government, too, recorded a deficit of 18.0 billion euros in 2020. Local government recorded a relatively small deficit of -1.3 billion euros in 2020, one of the reasons being higher transfers from central and state government.

Economic stimulus package contributes considerably to deficit

A major factor contributing to the deficit of central and state government was expenditure made on interim financial help and emergency aid as well as the acquisition and supply of protective equipment. Paid social benefits other than social transfers in kind rose markedly by 8.7% to 593.1 billion euros. This was due to marked increases in unemployment benefit and short-time working benefit as well as higher payments for pensions and children’s allowance. Social security funds thus automatically had a stabilising effect on the economy. However, the interest rate level was still very low and had a downward effect on government interest payments. They were down by 20.7% to 21.8 billion euros.

Tax revenue down 6.5% on 2019

As regards the revenue side, especially tax revenue was markedly below previous year's level (-6.5%). Wage tax revenue decreased moderately (-2.3%), whereas revenue from corporation tax fell substantially (-13.5%). Due to low final consumption expenditure of households and the temporary reduction of value-added tax rates as of 1 July 2020, revenue from taxes on products, too, were down (-6.9%). Only revenue from social contributions went slightly up (+1.7%).

More information:
The European statistical office Eurostat provides data on European government finance on its website.

Current data on the Federal Government’s economic stimulus package aimed at overcoming the corona crisis and many other indicators on economic, financial, health and mobility topics are provided through the data portal “Dashboard Deutschland” (www.dashboard-deutschland.de) of the Federal Statistical Office.

Methodological note:
Generally, granting loans or guarantees has no immediate effect on the financial balance (net lending/net borrowing) of general government as defined by the System of Accounts (ESA 2010). In national accounts, they are recorded with an effect on the deficit only if there definitely is a default on a loan or guarantee.

The greater uncertainties caused by the corona crisis may lead to larger revisions than usual in all components of the national accounts.