German central bank plunges to record €19bn loss #NewsGerman

Germany’s central bank plunged to a record €19.2bn (£15.9bn) loss last year in the latest setback for Europe’s largest economy.

A bond-buying spree prompted the Bundesbank to report its largest net loss in history, with officials warning that financial strain would remain throughout 2025.

Sabine Mauderer, the Bundesbank’s first deputy governor, said: “Overall, we expect to report losses and carry them forward for some time.”

The losses stem from the central bank holding too many government bonds with low yields, which were unable to offset a recent rise in borrowing costs that led to the Bundesbank paying out more in interest to banks.

Adrian Prettejohn, an economist at Capital Economics, said: “It was buying bonds with yields that were very low or negative, and now it is paying interest rates at 2.5pc, or last year it was 4pc.”

In the UK, the Bank of England’s quantitative easing programme is indemnified, meaning the Treasury covers any losses and takes any profits.

By contrast, the German central bank takes on all of the risk, meaning there will be no cost to German taxpayers.

However, it comes at a time of increasing gloom around the German economy, which is grappling with a slump in manufacturing, an ageing population and Donald Trump’s global trade war.

This has led to the German economy shrinking for two years in a row.

Joachim Nagel, Deutsche Bundesbank’s president, warned: “At present, the German economy is in a state of stubborn stagnation. Real gross domestic product has seen practically no growth since 2018.

“It is not possible to rule out a third consecutive calendar year with no growth.”

It will make grim reading for Friedrich Merz, the leader of Germany’s conservative Christian Democratic Union party who is attempting to build a coalition government after winning this week’s general election.

Meanwhile, Germany’s central bank also recorded a loss in 2023, although it boasted enough in reserve to still record a net profit of zero.

By contrast, it only had around €700m in reserve last year, which led to overall losses of €19.2bn.

Despite this, Ms Mauderer stressed that the “Bundesbank’s balance sheet is sound”.

She said: “The Bundesbank remains able to fully discharge its tasks even with an accumulated loss.”

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