Global Development of Public Debt
The current global debt policy is characterized by an unprecedented increase in public debt, affecting both industrialized and emerging countries. The news that states are “unleashed” in taking on new debt is reflected in current data and analyses.
Record values in global indebtedness: Global debt reached a new record of over 324 trillion US dollars in the first quarter of 2025. In this period alone, debt increased by around 7.5 trillion dollars – more than four times the average quarterly increase since the end of 2022.
Drivers of the increase: Particularly China, France, and Germany have significantly contributed to the global debt increase. In these countries, both public and private corporate debts have been incurred.
Effects of the weaker dollar: The devaluation of the US dollar against key trading partners has increased the value of dollar-denominated debts. At the same time, it served as a buffer against external shocks for some developing countries.
Situation in Germany
Borrowing and outstanding loans: By the end of February 2025, the federal government had grossed around 65 billion euros in loans (including special funds). The total loan stock at that time was about 1,688 billion euros.
Public debt ratio: According to the International Monetary Fund, Germany’s public debt last year was approximately 62 percent of Gross Domestic Product (GDP).
Investments in armaments and infrastructure: Germany plans to allocate significant amounts for armament expenditures as well as infrastructure projects. These expenditures will be financed through additional borrowing.
Impact on Economic Policy and Investment Decisions
Challenges in economic policy: The massive increase in public debt forces governments to adjust their financial policies – especially if political uncertainties or trade conflicts remain. Stimulus measures may become necessary.
Blocked development due to interest burdens: Many indebted states pay back more than a billion US dollars daily to foreign creditors – funds that could be missing for investments in education or health.
Potential risks for investors: High public debt can lead to rising interest rates or affect confidence in the creditworthiness of individual countries. For investors, this means increased risk when investing in government bonds or other fixed-income securities.
- An expansive fiscal policy can stimulate growth in the short term and benefit certain sectors (e.g., construction, armaments industry).
- However, in the long term, there is a risk of higher inflation or a burden on future generations due to tax-funded repayments.
Summary Evaluation
The current policy of many countries – including Germany – is characterized by high new indebtedness to finance large projects such as armament expenditures and infrastructure investments. This leads to a historic peak in global indebtedness with far-reaching consequences for economic policy, growth potential, as well as opportunities and risks for investors worldwide.