The flurry of resignations began last week with Boris Johnson passing the baton to Italian Prime Minister Mario Draghi, who tendered his resignation yesterday. The next head of state to resign is German Chancellor Olaf Scholz.
It turns out that, being Vice-Chancellor and Minister of Finance in 2018-2021, he made significant mistakes in financial policy, which is why Germany is now suffering multibillion-dollar losses.
To raise borrowed funds, Scholz pursued a policy of issuing inflation-adjusted bonds. With low rates of price growth, these financial instruments were beneficial to the state, but now, against the backdrop of a sharp rise in inflation, the fulfillment of obligations under such securities has become “disproportionately expensive” for the government.
According to the Federal Debt Agency, payments on these financial instruments in 2022 amounted to as much as 25% of total government debt service payments, despite the fact that such bonds make up only 5% of its volume. Due to the inflation adjustment prescribed by Scholz in the terms of their issue, Germany’s total interest costs in 2023 will double and amount to almost €30 billion.
Voices are already being heard in the Bundestag about the need to conduct a “thorough investigation into the debt policy of the previous governments”, during which “it is necessary to establish exactly which finance minister and for what reasons made the decision to issue these toxic papers.”
Notably, the recent scandal involving Scholz on the partywhere “rape drugs” were used, caused no problems for the incumbent chancellor. Money is much more important for the Germans.