The increase in interest rates is placing significant financial burdens on the federal government. According to a simulation conducted by economist Friedrich Heinemann of Mannheim for the “Frankfurter Allgemeine Zeitung”, simply the rise in interest rates since last year is projected to cost taxpayers an additional 58 billion euros in interest payments over the next five years. This calculation assumes that current interest rates remain stable indefinitely. Furthermore, Heinemann warns that an additional rise of 100 basis points could increase the debt servicing costs by another 71 billion euros by 2031.
Commenting from the Leibniz Center for European Economic Research (ZEW) in Mannheim, Heinemann stated, “We are entering a period of rising interest burdens similar to what we experienced in the 1980s and 1990s.” He emphasized that while Germany managed to recover from such situations in the past, he believes that is no longer possible today, meaning the federal government will inevitably have to cut expenditures.
The economist also issued a warning that Germany risks damaging its good reputation in the capital markets. Heinemann believes the risk of Germany losing its AAA credit rating is “enormously high.” He pointed out that national debt is set to rise to approximately 2.862 trillion euros by the end of the decade-an increase of 1,000 billion euros compared to 2025 figures. According to Heinemann, if it becomes clear that a substantial portion of this new debt will not be used for comprehensive renewal of German infrastructure, maintaining the AAA rating will become unsustainable.
