Berlin debt splurge affects German property firms

Berlin's borrow-to-spend splurge is driving up borrowing costs, further choking embattled property companies seeking fresh loans and threatening to compound the country's wider economic woes.

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Aproperty crisis in Germany, Europe's industrial engine, has seen worried investors pull billions of euros out of the critical sector, amid scores of company bankruptcies.

After rocketing over the past decade, property prices are now in a downward spiral, with experts predicting there will be worse ahead.

Tumbling demand for offices, many still vacant after the pandemic, and a continued slide in home values are compounding Germany's problems, as it grapples with one of its biggest post-war economic slumps, according to Reuters.

Earlier this week, the country's lawmakers agreed to go on a 500-billion euro ($545.45 billion) borrowing spree, ditching self-imposed debt restraint, to renew the country's sagging infrastructure.

Perversely for German companies, intended to benefit from this boost, it means higher borrowing costs.

The yields for benchmark IO-year government bonds, which determine the cost of credit, rose more than a quarter percentage point after the recent spending plans.