For the first time since 1979, Germany’s Bundesbank has reported a significant loss, totaling 19.2 billion euros for the past year. This marks the fifth consecutive year the bank will not contribute to the state budget, a vital source of income for the federal government in previous years.
Bundesbank President Joachim Nagel acknowledged the continuing challenges, stating that the situation would remain difficult in the coming years but expressed hope that the worst of the financial losses had already passed.
The primary cause of the loss was the European Central Bank’s (ECB) aggressive interest rate hikes, which began in 2022 to tackle inflation. This move led to higher costs for the Bundesbank in interest payments, while income from previous bond investments remained stagnant. In 2023, the bank managed to avoid a loss by dipping into its reserves, but by 2024, its financial reserves had shrunk to just 700 million euros.
The ECB itself reported its own record loss of 7.9 billion euros, underscoring the financial strain on the eurozone’s banking system. However, the Bundesbank reassured that it remains stable, citing the increased value of Germany’s gold reserves. The total value of gold and foreign currency in the bank’s assets reached 267 billion euros.
Germany’s Ministry of Finance, which had typically counted on an annual 2.5 billion euros from Bundesbank profits for the state budget, will once again face a shortfall this year. The last time losses were recorded was 45 years ago, in 1979, when they amounted to the equivalent of 2.9 billion euros. Looking ahead, the ECB forecasts that inflation in Germany will return to the target of 2% by 2026, which is expected to stabilize the economic situation.
