Bloomberg News

Germany Cuts 2012 Debt Sale Plan in Refocus on Short-Term Bills

June 12, 2012

German Chancellor Angela Merkel’s government cut the total amount of debt it aims to sell this year under a new budget plan drafted to pay for the euro area’s permanent rescue fund.

The federal government will sell 256.9 billion euros ($320 billion) in bonds and bills this year, down from the 260.4 billion euros in the original budget, the revised plan posted on parliament’s website showed. The Finance Ministry reduced sales of bonds with a maturity longer than one year by 11 billion euros and adding 7.4 billion euros in bills maturing within 12 months.

Merkel’s government reopened the budget to finance 8.7 billion euros in spending on the European Stability Mechanism, which is due to come into force in July. Yet tax-revenue growth this year and savings on planned outlays were larger than planned, allowing the reduction in bond sales.

The supplementary budget shows that the biggest shift affects bonds with a maturity of between one year and four years. The government will sell 55.3 billion euros of the debt compared with 65.3 billion euros earmarked in the earlier budget.

The sale of bills maturing within a year will increase to 76 billion euros compared with 68.6 billion euros. Planned sales of debt with a maturity of one year to 30 years, which includes Germany’s benchmark 10-year bunds, remain little changed at 125.5 billion euros, compared with 126.4 billion euros, the draft shows.

Germany released a federal debt plan for 2012 in December, when it forecast sales of 250 billion euros. The total was revised earlier this year to include anticipated costs for the ESM and the sale of index-linked bonds, bringing the total to 260 billion euros. The Frankfurt-based Federal Finance Agency, which manages the debt sales, will release a third-quarter calendar at the end of this month.

Investors’ search for security as the debt crisis worsens has pushed the cost of German borrowing to record lows. The government has offered zero coupons on several maturities, including a six-month bill sold yesterday.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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