It was a few days ago when two events happened in quick succession that cast a distorted light on Germany’s financial trustworthiness. So far, no one has brought them together, which is because the punch line is not a bang, but polite disinterest. But they belong together. It’s about them Tricks in the householdwhich are now questioning Germany’s creditworthiness as a debtor on the global financial markets.

On the morning of that day, two studies by independent economic institutes – from ifo in Munich and from IW in Cologne – the distrust in the soundness of the German budget, which arose under Finance Minister Lars Klingbeil from the SPD. Both institutes have come to the undisputed conclusion that a large part of the additional debt that the federal government has taken on for investments is not being spent on this at all. Rather, they ultimately serve to plug holes in the pension fund and health system, which are becoming ever larger due to a lack of reforms.

The receipt from the financial agency

The response to the studies was great. Since then there has been talk of XXL cheating and sleight of hand. What has so far gone unnoticed is that a few hours later the finance minister received the receipt in his hands. At that time, the federal finance agency, which reports to the minister, wanted to further increase the state’s ten-year federal bond.

In itself, this is a no-brainer. The paper is sought after by those seeking safe havens. Given the circumstances, the auction went terribly wrong. Some of the securities simply found no takers, and those who finally bought paid for their growing unease with higher interest rates, which are nothing more than the discreet price for dwindling confidence. Investors are apparently distancing themselves from Germany.

When billions find no takers

Klingbeil wanted to borrow five billion euros for Germany when the drama began: there were only bids for 4.5 billion euros, and in the end only 3.8 billion were allocated. And these weren’t just available as usual, but the interest rates on them rose: the yield at the auction was around 2.9 percent. In January it was a maximum of 2.65 percent – 25 basis points more, the investors calculate.

In the world of government bonds, this is no longer an outlier, but it is no longer irrelevant either. “No breathing space for returns,” commented Deutsche Bank analysts. Now you could dismiss this as a technical glitch, a whim of the market, a temporary imbalance between supply and demand, but this interpretation has a crucial catch: it ignores the point in time.

The fairy tale of special assets

Inflation is not the only thing that is making a comeback in view of the rapidly rising energy costs in Germany. The economic research institutes had just made it clear what the budget really is, although the real accusation lies less in the amount of debt than in its packaging. Because what was once simply called “borrowing” is now glorified as “special assets”, as if the word alone were capable of changing the economic content.

The impression is created of a state that is not only up to its neck in debt, but is also telling itself that it isn’t doing it at all. The market, however, does not believe this form of fiscal self-soothing. He reacts with distance, which is reflected in slightly higher returns and a more cautious willingness to underwrite. Neither are moral categories, but rather a sober diagnosis. It doesn’t mean that something is wrong, but rather that it has become riskier.

Trust evaporates in basis points

For the finance minister, this is a lesson that cannot be explained away: you can reinterpret debts politically, you can move them to other pots, you can give them pleasant-sounding terms. But in the end it is not the language that decides, but the willingness to pay of those who actually lend the money.

And this willingness to pay, as it turns out, is no longer a given, but a question of trust that does not disappear abruptly, but gradually evaporates: first in basis points, then in auctions, perhaps at some point in ratings. In any case, the market has started to ask questions.