KfW 18-K Annual report (foreign governments)

Exhibit (d)

This description of KfW and the Federal Republic of Germany is dated May 13, 2024 and appears as Exhibit (d) to the Annual Report on Form 18-K of KfW for the fiscal year ended December 31, 2023.

TABLE OF CONTENTS

	Page
PRESENTATION OF FINANCIAL AND OTHER INFORMATION		3
RECENT DEVELOPMENTS		4
KFW		4
KfW’s Results for the Three Months Ended March 31, 2024		4
THE FEDERAL REPUBLIC OF GERMANY		7
Overview of Key Economic Figures		7
KFW		11
GENERAL		11
Overview		11
Ownership		11
Legal Status		12
Relationship with the Federal Republic		12
Supervision and Regulation		13
Corporate Background		16
Sustainable Promotion		16
Financial Statements and Auditors		19
BUSINESS		20
Introduction		20
Domestic Promotional Business		21
SME Bank & Private Clients		24
Customized Finance & Public Clients		26
KfW Capital		28
Export and Project Finance (KfW IPEX-Bank)		29
KfW Entwicklungsbank (KfW Development Bank)		33
DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH		35
Financial Markets		36
Strategic Shareholdings		42
CAPITALIZATION		45
MANAGEMENT AND EMPLOYEES		46
Executive Board		46
Board of Supervisory Directors		48
Employees		51
THE FEDERAL REPUBLIC OF GERMANY		G-1
GENERAL		G-1
Area, Location and Population		G-1
Government		G-2
Political Parties		G-3
International Organizations		G-4
The European Union and European Integration		G-4
Statistical Standards		G-13
THE ECONOMY		G-15
Overview		G-15
Key Economic Figures		G-15
Economic Outlook		G-16
General Economic Policy		G-17
Gross Domestic Product		G-19
Sectors of the Economy		G-20
Employment and Labor		G-21
Social Security, Social Protection, and Social Policy		G-23
International Economic Relations		G-24

1

MONETARY AND FINANCIAL SYSTEM	G-30
The ESCB and the Eurosystem	G-30
Monetary Policy	G-30
Official Foreign Exchange Reserves	G-31
External Positions of Banks	G-32
Foreign Exchange Rates and Controls	G-32
Financial System	G-33
Securities Market	G-37
PUBLIC FINANCE	G-39
Receipts and Expenditures	G-39
Germany’s General Government Deficit/Surplus and General Government Gross Debt	G-40
Fiscal Outlook	G-42
Tax Structure	G-43
Government Participations	G-45
Direct Debt of the Federal Government	G-45
TABLES AND SUPPLEMENTARY INFORMATION	G-47

2

THIS DOCUMENT (OTHERWISE THAN AS PART OF A PROSPECTUS CONTAINED IN A REGISTRATION STATEMENT FILED UNDER THE U.S. SECURITIES ACT OF 1933) DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OF KFW. THE DELIVERY OF THIS DOCUMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this description, references to “€”, “euro” or “EUR” are to the single European currency of the member states of the European Union participating in the euro and references to “U.S. dollars”, “$” or “USD” are to United States dollars. See “The Federal Republic of Germany—General—The European Union and European Integration” for a discussion of the introduction of the euro.

Unless explicitly stated otherwise, financial information relating to KfW Group presented herein has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”).

Amounts in tables may not add up due to rounding differences.

On May 10, 2024, the euro foreign exchange reference rate as published by the European Central Bank was EUR 1.00 = U.S. dollar 1.0779 (EUR 0.9277 per U.S. dollar).

In this document, references to the “Federal Republic” and “Germany” are to the Federal Republic of Germany and references to the “Federal Government” are to the government of the Federal Republic of Germany. The terms “KfW Group” and “group” refer to KfW and its consolidated subsidiaries.

1

RECENT DEVELOPMENTS

KFW

KfW’s Results for the Three Months Ended March 31, 2024

KfW is not required by law to prepare and publish interim financial statements in conformity with International Financial Reporting Standards as adopted by the European Union (“IFRS”) applicable to interim financial reporting. Accordingly, KfW only prepares selected interim financial information rather than a full set of interim financial statements. The following information is based on this selected unaudited interim financial information prepared by KfW on the basis of the recognition and measurement principles of IFRS applicable to interim financial reporting. This information is not necessarily indicative of the figures of KfW Group for the full year ending December 31, 2024.

KfW Group’s total assets decreased by 1.5%, or EUR 8.1 billion, from EUR 560.7 billion as of December 31, 2023 to EUR 552.6 billion as of March 31, 2024. KfW Group’s operating result before valuation and promotional activities amounted to EUR 454 million for the three months ended March 31, 2024, compared to EUR 385 million for the corresponding period in 2023. The main driver for KfW Group’s operating result before valuation and promotional activities during the three months ended March 31, 2024, was net interest income. KfW Group’s operating result before valuation and promotional activities is before (i) risk provisions for lending business, (ii) net gains/losses from securities and investments, (iii) net gains/losses from hedge accounting and other financial instruments at fair value through profit or loss, and (iv) expenses relating to promotional activities. These valuation effects consisted mainly of the following:

• Income from risk provisions in an amount of EUR 108 million for the three months ended March 31, 2024, compared to income in an amount of EUR 5 million for the corresponding period in 2023;

• Positive effects in an amount of EUR 48 million as market values of securities and equity investments increased in the three months ended March 31, 2024, compared to positive effects of EUR 22 million for the corresponding period in 2023;

• Net gains in an amount of EUR 19 million for the three months ended March 31, 2024 due to fair value changes of derivatives used exclusively for hedging purposes in closed risk positions, compared to net gains in an amount of EUR 87 million for the corresponding period in 2023¹; and

• Expenses relating to promotional activities in an amount of EUR 77 million for the three months ended March 31, 2024, compared to expenses in an amount of EUR 82 million for the corresponding period in 2023.

KfW Group’s consolidated result for the three months ended March 31, 2024 amounted to a profit of EUR 461 million, compared to a profit of EUR 394 million for the corresponding period in 2023.

¹  KfW generally enters into derivative transactions to economically hedge interest and currency risks in connection with its financing and funding activities. Some economic hedging relationships entered into do not qualify for hedge accounting or the fair value option under IFRS. In these cases, only the fair value changes in the hedging instrument are recognized in the consolidated income statement as net gains/losses from other financial instruments at fair value through profit or loss, whereas fair value changes in the hedged instrument are not. As a result, the economic risk-mitigating effect of such hedging relationships is not reflected in the consolidated income statement.

2

Promotional Business Volume

The following table sets forth a breakdown of commitments by business sector for the three months ended March 31, 2024, compared to the corresponding period in 2023.

PROMOTIONAL BUSINESS VOLUMEBY BUSINESS SECTOR*

	Three months ended March 31,				Year-to-Year
	2024		2023		% change
	(EUR in millions)				(in %)
SME Bank & Private Clients (Mittelstandsbank & Private Kunden)		9,028		10,316		-12
Customized Finance & Public Clients (Individualfinanzierung & Öffentliche Kunden)		1,615		21,566		-93
KfW Capital		43		878		-95
Export and Project Finance (KfW IPEX-Bank)		6,135		6,663		-8
KfW Entwicklungsbank		508		506		<1
DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH		228		110		107
Financial Markets		0		188		-100
Total Promotional Business Volume (1) (2)		17,450		40,004		-56

* Amounts in the table may not add up due to rounding differences.

(1) Total promotional business for the three months ended March 31, 2024, has been adjusted for commitments of EUR 107 million, compared to EUR 223 million for the corresponding period in 2023, made by KfW IPEX-Bank relating to export and project finance and refinanced under certain programs of SME Bank.

(2) Commitments represent the volume of funds committed for loans and other business transactions (with the exception of program-based global loans, RegioInnoGrowth loans and global funding facilities to Landesförderinstitute) in the relevant period, including amounts to be disbursed in future periods, and do not include amounts disbursed in the relevant period pursuant to commitments made in prior periods. In the case of program-based global loans, RegioInnoGrowth loans and global funding facilities to Landesförderinstitute, commitments represent the actual volume of funds disbursed in the relevant period.

KfW’s total promotional business volume decreased to EUR 17.5 billion for the three months ended March 31, 2024, compared to EUR 40.0 billion for the corresponding period in 2023. Commitments in KfW’s business sectors Customized Finance & Public Clients and KfW Capital GmbH & Co. KG (“KfW Capital”) decreased significantly. Commitments in the business sectors SME Bank & Private Clients, Export and Project Finance and KfW Entwicklungsbank decreased as well, while commitments in the business sector DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (“DEG”) increased substantially. There were no commitments in Financial Markets.

Commitments in the SME Bank & Private Clients business sector amounted to EUR 9.0 billion for the three months ended March 31, 2024, compared to EUR 10.3 billion for the corresponding period in 2023. This slight decrease was attributable to lower commitments in SME Bank (EUR 3.0 billion compared to EUR 6.0 billion for the corresponding period in 2023) which were partially offset by higher commitments in the Private Clients segment. The decline in the volume of new commitments in SME Bank was primarily due to lower commitment volumes under renewable energy programs and the SME Climate Protection Facility.

Commitments in the business sector Customized Finance & Public Clients amounted to EUR 1.6 billion for the three months ended March 31, 2024, compared to EUR 21.6 billion for the corresponding period in 2023. This significant decrease was primarily driven by the decrease in loan commitments to companies in the energy sector compared to the corresponding period in 2023. In 2023, there was a particularly high volume of loan commitments to companies in the energy sector, which were made under special mandates by the Federal Government (“Federal Government”) of the Federal Republic of Germany (“Federal Republic”) against the background of rising energy prices and in consideration of their impact on the stability of relevant infrastructure in Germany, following Russia’s invasion of Ukraine.

Commitments related to KfW Capital decreased to EUR 43 million for the three months ended March 31, 2024, compared to EUR 878 million for the corresponding period in 2023. This substantial decrease was mainly attributable to a one-off investment made by KfW in the first quarter of 2023 on a fiduciary basis for the Federal Government with governmental funds into the European Tech Champions Initiative through the “Future Fund” (Zukunftsfonds).

Commitments in KfW’s Export and Project Finance business sector for the three months ended March 31, 2024 amounted to EUR 6.1 billion, compared to commitments of EUR 6.7 billion for the corresponding period in 2023. This decrease was primarily due to certain extraordinary, non-recurring transactions executed in the Industries and Commerce sector in 2023.

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Commitments related to KfW Entwicklungsbank remained relatively stable at EUR 508 million for the three months ended March 31, 2024, compared to EUR 506 million for the corresponding period in 2023.

Commitments of DEG amounted to EUR 228 million for the three months ended March 31, 2024, compared to EUR 110 million as of March 31, 2023. This increase was mainly due to commitments made in the first quarter of 2024 having been higher in volume than those made in the more restrained first quarter of 2023.

There were no commitments related to the Financial Markets business sector for the three months ended March 31, 2024. In 2023, all commitments in KfW’s Financial Markets business sector were made under KfW’s green bond portfolio. After the targets of KfW’s green bond portfolio were reached, the Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection and KfW agreed to terminate the mandate, which launched the green bond portfolio. The mandate expired at the end of December 2023. Existing green bonds will be held to maturity.

Sources of Funds

The volume of funding raised in the capital markets for the three months ended March 31, 2024 totaled EUR 35.6 billion, of which 53.9% was raised in euro, 33.5% in U.S. dollar and the remainder in four other currencies.

Capitalization and Indebtedness of KfW Group as of March 31, 2024*

	(EUR in millions)
Borrowings
Short-term funds		21,556
Bonds and other fixed-income securities		429,413
Other borrowings		48,411
Total borrowings		499,379
Equity
Paid-in subscribed capital (1)		3,300
Capital reserve		8,447
Reserve from the ERP Special Fund		1,191
Retained earnings		25,611
Revaluation reserve		-13
Total equity		38,536
Total capitalization		537,915

* Amounts in the table may not add up due to rounding differences.

(1) KfW’s equity capital, 80% of which is held by the Federal Government and the remaining 20% by the Länder, amounted to EUR 3,750 million as of March 31, 2024, of which EUR 3,300 million has been paid in pro rata by the Federal Government and the Länder.

The capitalization of KfW Group as of March 31, 2024 is not necessarily indicative of its capitalization to be recorded as of December 31, 2024.

KfW Group’s total equity as of March 31, 2024 was EUR 38,536 million, compared to EUR 38,073 million as of December 31, 2023. The increase, of EUR 463 million in total equity reflected:

(i) KfW Group’s consolidated profit of EUR 461 million for the three months ended March 31, 2024; and

(ii) an increase of EUR 1 million of revaluation reserves due to valuation results recognized directly in equity relating to pensions and own credit risk.

In connection with the phase-in of the analogous application of banking supervisory law to KfW, the provisions of the EU Capital Requirements Regulation (Regulation EU No 575/2013, “CRR”), the German Banking Act (Kreditwesengesetz) and the German Solvency Regulation (Solvabilitätsverordnung), which require banks to have adequate own funds (Eigenmittel) for the conduct of their business, have become applicable to KfW by analogy with effect from January 1, 2016. In June 2017, KfW received the approval from the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) to calculate its regulatory capital requirements following the advanced internal ratings-based approach (“IRBA”) for a large part of its portfolio as of June 30, 2017.

Based on the results for the three months ended March 31, 2024, KfW’s total capital ratio amounted to 28.6% and its Tier 1 capital ratio according to Article 92 of the CRR amounted to 28.5%, in each case as of March 31, 2024 (not taking into account the interim profit of the year to date)². The increase of the total capital ratio and the Tier 1 capital ratio compared to December 31, 2023, when the total capital ratio as well as the Tier 1 capital ratio amounted to 27.9%, was mainly due to the recognition of the profit of the second half of 2023.

²  According to Article 26(2) CRR.

4

THE FEDERAL REPUBLIC OF GERMANY

Overview of Key Economic Figures

The following economic information regarding the Federal Republic is derived from the public official documents cited below. Certain information is preliminary.

Gross Domestic Product (GDP)

GROSS DOMESTIC PRODUCT

(adjusted for price, seasonal and calendar effects) (1)

Reference period	Percentage change on the previous quarter		Percentage change on the same quarter in previous year
1st quarter 2023		0.3		0.1
2nd quarter 2023		-0.1		0.1
3rd quarter 2023		0.1		0.0
4th quarter 2023		-0.5		-0.2
1st quarter 2024		0.2		-0.2

(1) Adjustment for seasonal and calendar effects according to the Census X13 method.

Germany’s gross domestic product (“GDP”) increased by 0.2% in the first quarter of 2024 compared to the fourth quarter of 2023 after adjustment for price, seasonal and calendar effects, following a decrease at the end of 2023. This was mainly due to an increase in gross fixed capital formation in construction and in exports. By contrast, there was a decline in household final consumption expenditure.

Compared to the first quarter of 2023, price-adjusted GDP in the first quarter of 2024 decreased by 0.9%. The price and calendar adjusted GDP was 0.2% lower because there were 1.6 fewer working days than in the same period a year earlier.

In addition to calculating data for the first quarter of 2024, as usual the Federal Statistical Office also reviewed the results published earlier for 2023 and included new statistical information in the calculation of the results. This resulted in changes of up to 0.2 percentage points for the quarterly price adjusted GDP data published so far. The latest calculations show that economic performance in 2023 as a whole declined by a price adjusted 0.2% (previously: -0.3%), and economic growth stagnated after adjustment for price and calendar effects (revised: 0.0%, previously: -0.1%).

Source: Federal Statistical Office, Gross domestic product in the 1st quarter of 2024 up 0.2% on the previous quarter, press release of April 30, 2024

(https://www.destatis.de/EN/Press/2024/04/PE24_173_811.html).

5

Inflation Rate

INFLATION RATE

(based on overall consumer price index)

Reference period	Percentage change on the previous month		Percentage change on the same month in previous year
March 2023		0.8		7.4
April 2023		0.4		7.2
May 2023		-0.1		6.1
June 2023		0.3		6.4
July 2023		0.3		6.2
August 2023		0.3		6.1
September 2023		0.3		4.5
October 2023		0.0		3.8
November 2023		-0.4		3.2
December 2023		0.1		3.7
January 2024		0.2		2.9
February 2024		0.4		2.5
March 2024		0.4		2.2

The inflation rate in Germany, measured as the year-on-year change in the consumer price index, amounted to 2.2% in March 2024, after 2.5% in February 2024 and 2.9% in January 2024. The inflation rate in March 2024 represented the lowest inflation rate since May 2021, when it also stood at 2.2%. Before May 2021, an even lower value was observed in April 2021 (+2.0%). According to the Federal Statistical Office, in March 2024, for the first time since February 2015, consumers paid less for food than a year earlier. The inflation rate excluding food and energy, often referred to as core inflation, was 3.3% in March 2024 compared to March 2023.

Energy prices in March 2024 decreased by 2.7% compared to March 2023 despite the discontinuation of the energy price brake and the introduction of a higher carbon price, both as of January 2024, which affected the price of fossil fuels such as motor fuels, heating oil and natural gas. Since the beginning of 2024, a year-on-year decrease in energy prices has therefore been consistently recorded (January 2024: -2.8%; February 2024: -2.4%), which had a downward effect on the rate of inflation.

Food prices decreased by 0.7% in March 2024 compared to March 2023, the first decrease since February 2015 (-0.2%). The increase in food prices has slowed since April 2023 and was already below the overall rate of inflation in February 2024. In particular, the prices of fresh vegetables (-20.1%) declined in the period from March 2023 to March 2024. Consumers also had to pay markedly less for dairy products compared to March 2023 (-5.5%), while fish, fish products and seafood were more expensive (+0.9%). In contrast, price increases of a variety of foodstuffs in March 2024 exceeded the overall rate of inflation, including the price of sugar, jam, honey and other confectionery (+8.4%), the price of fruit (+4.2%) and the price of bread and cereals (+3.0%). Year on year, a marked decline was recorded in the price of sunflower oil, rapeseed oil and the like (-21.7%), while olive oil prices saw a steep increase (+54.1%).

The prices of goods (total) increased by 1.0% in the period from March 2023 to March 2024, representing a lesser increase than overall inflation. In March 2024, the prices of non-durable consumer goods and durable consumer goods rose by 0.5% and 1.8%, respectively. Some goods registered above-average price increases, however, for example non-alcoholic beverages (+6.5%), alcoholic beverages and tobacco products (+5.2%) and passenger cars (+4.1%). In contrast, lower prices were observed, for example, for mobile phones (-5.3%) and information processing equipment (-5.5%).

The prices of services (total) increased by 3.7% in March 2024 compared to March 2023. A major factor contributing to the development of service prices was the 2.1% increase in net rents exclusive of heating expenses. The prices of a number of other services increased above average, among them, insurance services (+11.0%), services of social facilities (+7.8%) and catering services in restaurants, cafés and the like (+6.9%). In contrast, the Germany ticket for public transport, which has been available since May 2023, continued to have a dampening effect on the increase in service prices in March 2024. Consumers had to pay less for the combined tickets for rail, bus and the like (-23.3%) compared to March 2023.

6

Compared to February 2024, the consumer price index increased by 0.4% in March 2024. However, energy prices and food prices each decreased by 0.3% compared to February 2024.

According to provisional estimates, the inflation rate is expected to be 2.2% in April 2024 compared to April 2023.

Sources: Federal Statistical Office, Short-term indicators: Price indices at a glance (consumer prices, retail prices, producer prices, selling prices in wholesale trade, import prices, export prices). Tables with values and rates of change

(https://www.destatis.de/EN/Themes/Economy/Short-Term-Indicators/Prices/pre110.html);

Federal Statistical Office, Inflation rate at +2.2% in March 2024, press release of April 12, 2024

(https://www.destatis.de/EN/Press/2024/04/PE24_150_611.html);

Federal Statistical Office, Inflation rate of +2.2% expected in April 2024, press release of April 29, 2024

(https://www.destatis.de/EN/Press/2024/04/PE24_169_611.html).

Unemployment Rate

UNEMPLOYMENT RATE

(percent of unemployed persons in the total labor force according to the

International Labour Organization (ILO) definition) (1)

Reference period	Original percentages		Adjusted percentages (2)
March 2023		2.9		2.9
April 2023		3.1		2.9
May 2023		2.8		2.9
June 2023		3.0		3.0
July 2023		3.0		3.0
August 2023		3.2		3.0
September 2023		3.0		3.1
October 2023		3.2		3.1
November 2023		3.1		3.1
December 2023		2.9		3.1
January 2024		3.1		3.2
February 2024		3.5		3.2
March 2024		3.4		3.2

(1) The time series on unemployment are based on the German Labour Force Survey.

(2) Trend cycle component (X-13-ARIMA method using JDemetra+; calculation by Eurostat).

Compared to March 2023, the number of employed persons in March 2024 increased by approximately 100,000 or 0.2%. Compared to February 2024, the number of employed persons in March 2024 increased by approximately 8,000 or 0.0%, after adjustment for seasonal fluctuations.

In March 2024, the number of unemployed persons increased by approximately 233,000 or 18.1%, compared to March 2023. Adjusted for seasonal and irregular effects, the number of unemployed persons in March 2024 stood at 1.42 million, reflecting an increase of 7,000 or 0.5% compared to February 2024.

Sources: Federal Statistical Office, Rate of increase in employment continued to slow in March 2024, press release of April 30, 2024

(https://www.destatis.de/EN/Press/2024/04/PE24_171_132.html);

Federal Statistical Office, Genesis-Online Datenbank, Result 13231-0001, Unemployed persons, persons in employment, economically active population, unemployment rate: Germany, months, original and adjusted data

(https://www-genesis.destatis.de/genesis/online?

sequenz=tabelleErgebnis&selectionname=13231-0001&zeitscheiben=2&leerzeilen=false&language=en#abreadcrumb).

7

Current Account and Foreign Trade

CURRENT ACCOUNT AND FOREIGN TRADE

	(balance in EUR billions) (1)
Item	January-February 2024		January-February 2023
Goods		51.5		30.2
Services		-7.5		-5.5
Primary income		22.7		24.0
Secondary income		-9.1		-10.9
Current account		57.7		37.9

(1) Figures may not add up due to rounding.

Source: Deutsche Bundesbank, Balance of payments statistics, 11-04-2024, I. Major items of the balance of payments

(https://www.bundesbank.de/resource/blob/914116/bab6740d6f03a824b27eba8a33c7b401/mL/2024-04-11-zahlungsbilanz-anlage-data.pdf).

Monetary Policy

On April 11, 2024, the Governing Council of the European Central Bank (“ECB”) reaffirmed its decisions of January 25, 2024 and March 7, 2024, by deciding to keep the three key ECB interest rates unchanged at 4.50% (main refinancing operations), 4.75% (marginal lending facility) and 4.00% (deposit facility). Based on its assessment as of April 11, 2024, the Governing Council considers that the key ECB interest rates are at levels that are making a substantial contribution to the timely return of inflation to the medium-term target level of 2%.

On April 11, 2024, the Governing Council of the ECB also reiterated that the Asset Purchase Programme (APP) portfolio is declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities. The Governing Council stated that it intends to continue to reinvest, in full, the principal payments from maturing securities purchased under the Pandemic Emergency Purchase Programme (PEPP) during the first half of 2024. Over the second half of the year, it intends to reduce the PEPP portfolio by EUR 7.5 billion per month on average. The Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024. It stated it will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the COVID-19 pandemic.

Source: European Central Bank, Monetary policy decisions, press release of April 11, 2024

(https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.mp240411~1345644915.en.html).

8

KFW

GENERAL

Overview

KfW is a public law institution (Anstalt des öffentlichen Rechts) serving domestic and international public policy objectives of the Federal Government of the Federal Republic. KfW promotes its financing activities under the umbrella brand name KfW Bankengruppe (“KfW Group”).

With total assets of EUR 560.7 billion as of December 31, 2023, including loans and advances of EUR 450.0 billion, KfW is Germany’s flagship promotional bank and ranks among Germany’s largest financial institutions. KfW’s promotional business volume amounted to EUR 111.3 billion in 2023. For more information on KfW’s promotional business volume, see the table “Promotional Business Volume by Business Sector” in “Business—Introduction.”

KfW conducts its business in the following business sectors:

• SME Bank & Private Clients (Mittelstandsbank & Private Kunden): offers highly standardized products primarily for small and medium-sized enterprises (“SMEs”), business founders, start-ups, self-employed professionals and private individuals;

• Customized Finance & Public Clients (Individualfinanzierung & Öffentliche Kunden): provides individual financing solutions for municipal and social infrastructure, and offers corporate loans and project financing as well as customized financing for financial institutions and Landesförderinstitute;

• KfW Capital: KfW Capital invests in German and European venture capital and venture debt funds with the aim of improving access to capital for innovative, technology-oriented growth companies in Germany through professionally managed funds. KfW Capital is a legally independent entity wholly owned by KfW;

• Export and Project Finance: KfW IPEX-Bank GmbH (“KfW IPEX-Bank”) offers customized financing for exports and project and corporate financing worldwide. KfW IPEX-Bank is a legally independent entity wholly owned by KfW;

• KfW Entwicklungsbank (KfW Development Bank) is responsible for KfW’s public sector development cooperation activities;

• DEG – DEG finances private-sector investments in developing countries. DEG is a legally independent entity wholly owned by KfW; and

• Financial Markets: comprises KfW’s treasury, funding, asset management and other capital markets-related activities.

In addition, KfW manages its direct and indirect strategic shareholdings, which include a number of investments made in companies pursuant to special mandates (Zuweisungsgeschäfte) by the Federal Government in accordance with article 2 paragraph 4 of the Law Concerning KfW (Gesetz über die Kreditanstalt für Wiederaufbau, or the “KfW Law”). For more information on KfW’s business sectors and its strategic shareholdings, see “Business.”

KfW’s offices are located at Palmengartenstraße 5-9, 60325 Frankfurt am Main, Germany. KfW’s telephone number is 011-49-69-74310. KfW also maintains branch offices in Berlin and Bonn, Germany, as well as a liaison office to the EU in Brussels, Belgium.

Ownership

The Federal Republic holds 80% of KfW’s subscribed capital, and the German federal states (each, a “Land” and together, the “Länder”) hold the remaining 20%. The KfW Law does not provide for shareholders’ meetings; instead, the Board of Supervisory Directors assumes the responsibilities of a shareholders’ meeting. For more information on the Board of Supervisory Directors, see “Management and Employees—Board of Supervisory Directors.”

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Shares in KfW’s capital may not be pledged; they may not be transferred to entities other than the Federal Republic or the Länder. Capital contributions have been, and are expected to continue to be, made to KfW in such proportions as to maintain the relative shares of capital held by the Federal Republic and the Länder.

Legal Status

KfW is organized under the KfW Law as a public law institution with unlimited duration. As a public law institution serving public policy objectives of the Federal Government, KfW itself is not subject to corporate taxes (although certain of its subsidiaries are), and as a promotional bank, KfW does not seek to maximize profits. KfW does, however, seek to maintain an overall level of profitability that allows it to strengthen its equity base in order to support its promotional activities. KfW is prohibited under the KfW Law from distributing profits, which are instead allocated to statutory reserves and to separately reportable reserves. KfW is generally also prohibited under the KfW Law from taking deposits or engaging in the financial commission business.

Relationship with the Federal Republic

Guarantee of the Federal Republic

The KfW Law expressly provides that the Federal Republic guarantees all existing and future obligations of KfW in respect of money borrowed, bonds and notes issued and derivative transactions entered into by KfW, as well as obligations of third parties that are expressly guaranteed by KfW (KfW Law, article 1a). Under this statutory guarantee (the “Guarantee of the Federal Republic”), if KfW fails to make any payment of principal or interest or any other amount required to be paid with respect to securities issued by KfW, or if KfW fails to make any payment required to be made under KfW’s guarantee when that payment is due and payable, the Federal Republic will be liable at all times for that payment as and when it becomes due and payable. The Federal Republic’s obligation under the Guarantee of the Federal Republic ranks equally, without any preference, with all of its other present and future unsecured and unsubordinated indebtedness. Holders of securities issued by KfW or issued under KfW’s guarantee may enforce this obligation directly against the Federal Republic without first having to take legal action against KfW. The Guarantee of the Federal Republic is strictly a matter of statutory law and is not evidenced by any contract or instrument. It may be subject to defenses available to KfW with respect to the obligations covered.

Institutional Liability (Anstaltslast)

KfW is a public law institution (Anstalt des öffentlichen Rechts). Accordingly, under the German administrative law principle of Anstaltslast, the Federal Republic, as the constituting body of KfW, has an obligation to safeguard KfW’s economic basis. Under Anstaltslast, the Federal Republic must keep KfW in a position to pursue its operations and enable it, in the event of financial difficulties, through the allocation of funds or in some other appropriate manner, to meet its obligations when due. Anstaltslast is not a formal guarantee of KfW’s obligations by the Federal Republic, and creditors of KfW do not have a direct claim against the Federal Republic. Nevertheless, the effect of this legal principle is that KfW’s obligations, including the obligations to the holders of securities issued by it or issued under KfW’s guarantee, are fully backed by the credit of the Federal Republic. The obligation of the Federal Republic under Anstaltslast would constitute a charge on public funds that, as a legally established obligation, would be payable without the need for any appropriation or any other action by the German Parliament.

Understanding with the European Commission

In order to clarify that the Federal Republic’s responsibility for KfW’s obligations was and is compatible with EU law prohibitions against state aid, the German Federal Ministry of Finance and the European Commissioner for Competition held discussions which were formalized in an understanding reached on March 1, 2002. In the understanding with the European Commission, it was agreed that, in respect of the promotional activities for which KfW is responsible, KfW will continue to benefit from Anstaltslast and the Guarantee of the Federal Republic. The understanding acknowledged that KfW’s role in providing financing for, in particular, SMEs, risk capital, environmental protection, technology/innovation, infrastructure and housing, as well as its cooperation with developing countries, is of a promotional nature and thus compatible with EU rules.

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In the business sector of Export and Project Finance, the understanding with the European Commission required KfW to transfer to a legally independent subsidiary that portion of export finance and domestic and international project finance activities which the European Commission deemed to fall outside the scope of the promotional activities of KfW. The transfer of such activities was to be effected by December 31, 2007, and as from that date, KfW has not been permitted to fund the subsidiary at other than market rates of interest or to extend to the subsidiary any benefits of Anstaltslast or the Guarantee of the Federal Republic.

KfW continues to be permitted, however, to engage directly in the following promotional export and project finance activities:

• implementation of international promotional programs, such as the interest-rate subsidized CIRR (Commercial Interest Reference Rate) and ASU (Aircraft Sector Understanding) schemes, which are recognized as promotional activities in accordance with the Organization for Economic Cooperation and Development (“OECD”) consensus;

• participation in syndicated financing activities outside the EU, the European Economic Area and countries holding the status of official candidate for EU membership, subject to certain conditions, and sole financing activities in countries in which sufficient sources of financing do not exist; and

• participation in projects in the interest of the EU that are co-financed by the European Investment Bank or similar European financing institutions.

The European Commission transformed the understanding into a decision, which the Federal Republic formally accepted. In August 2003, a part of the Promotional Bank Restructuring Act (Förderbankenneustrukturierungsgesetz) implemented the understanding with the European Commission and amended the KfW Law accordingly.

On January 1, 2008, KfW IPEX-Bank, a limited liability company (Gesellschaft mit beschränkter Haftung) formed as a wholly owned subsidiary of KfW, commenced operations as a legally independent entity, thus satisfying the requirements set forth in the understanding with the European Commission. KfW IPEX-Bank conducts those export and project finance activities which the European Commission deemed to fall outside the scope of KfW’s promotional activities directly and on its own behalf. For more information on KfW IPEX-Bank, see “Business—Export and Project Finance (KfW IPEX-Bank).”

Supervision and Regulation

Supervision

The Federal Ministry of Finance, acting in consultation with the Federal Ministry for Economic Affairs and Climate Action, exercises legal supervision (Rechtsaufsicht) over KfW, i.e., it supervises KfW’s compliance with applicable laws and may adopt all necessary measures to ensure such compliance. Legal supervision primarily comprises supervision of compliance with the KfW Law and KfW’s Bylaws, but also with all other applicable laws and regulations, except for certain provisions of bank regulatory law referenced in the following paragraph and described in “Regulation.” The relevant Federal Ministers are represented on KfW’s Board of Supervisory Directors, which supervises KfW’s overall activities. See below “Management and Employees—Board of Supervisory Directors.”

In addition to being subject to legal supervision by the Federal Ministries, in October 2013, KfW became subject to banking-specific supervision exercised by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or “BaFin”). This supervision was established by a ministerial regulation (KfW–Verordnung, or “KfW Regulation”), which implements an amendment to the KfW Law that became effective in July 2013. The KfW Regulation, while maintaining KfW’s general exemption from bank regulatory law, specifies those provisions of bank regulatory law which are to apply to KfW by analogy and assigns the supervision of compliance with these provisions to BaFin. In exercising its supervision, BaFin cooperates with the Deutsche Bundesbank in accordance with normal bank supervisory procedures. For further details, see “Supervision and Regulation—Regulation.”

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In addition to compliance with the financial reporting and auditing standards generally applicable to banks in Germany, KfW, under the KfW Law, is subject to special auditing standards for government-owned entities set forth in the Budgeting and Accounting Act (Haushaltsgrundsätzegesetz). These special auditing standards require that KfW’s annual audit, above and beyond its normal scope, cover the proper conduct of KfW’s business by its management. The resulting auditor’s report is to enable the Board of Supervisory Directors, the responsible Federal Ministries and the Federal Court of Auditors (Bundesrechnungshof) to form their own opinion and to take action if required.

Finally, as a government-owned entity, KfW is subject to audits by the Federal Court of Auditors (Bundesrechnungshof) with regard to its economical use of funds pursuant to the Budgeting and Accounting Act (Haushaltsgrundsätzegesetz).

Regulation

Overview of KfW’s Regulatory Status

KfW is generally exempt from bank regulatory laws and regulations, as it qualifies neither as a “credit institution” or “financial services institution” within the meaning of the German Banking Act (Gesetz über das Kreditwesen, or “KWG”), nor as a “credit institution” within the meaning of relevant EU directives and regulations, including in particular the EU Capital Requirements Directive (Directive 2013/36/EU, as amended) (“CRD”) and the CRR. However, by operation of the KfW Regulation, which has been in effect since January 1, 2016, considerable portions of the KWG and the CRR, including relevant implementing rules and regulations, apply by analogy to KfW. The KfW Regulation takes into account KfW’s special status as an entity not generally engaged in deposit taking, characterized by a low-risk profile in its lending business and benefiting from the Guarantee of the Federal Republic. It therefore provides for certain modifications and exceptions in connection with the analogous application of the relevant rules and regulations.

The analogous application of EU and national bank regulatory law imposed by the KfW Regulation is without prejudice to KfW’s status as a “public sector entity” within the meaning of article 4 paragraph 1 no. 8 of the CRR. This status confers certain advantages to KfW’s refinancing activities given the fact that exposures to public sector entities held by banks are privileged as to capital requirements, large exposures limitations and liquidity measurement under EU and national bank regulatory law. Securities issued by KfW, such as bonds and notes, are eligible in the EU as level 1 assets pursuant to article 10 paragraph 1 lit. (c) (v) of the Commission Delegated Regulation (EU) 2015/61 of October 10, 2014 (“Delegated Regulation”), subject to all other requirements stated in the Delegated Regulation being met.

Bank Regulatory Rules and Regulations Applied by Analogy

By operation of the KfW Regulation, bank regulatory requirements for corporate governance set forth in Sections 25c through 25d of the KWG apply to KfW by analogy. To comply with these requirements, certain adjustments were made to the committee structure of KfW’s Board of Supervisory Directors in 2014. For more information on the committee structure of KfW’s Board of Supervisory Directors, see “Management and Employees—Board of Supervisory Directors.”

Since January 1, 2018, the bank regulatory requirements for remuneration policies set forth in Section 25a of the KWG and further specified in the German Remuneration Regulation for Credit Institutions (Institutsvergütungsverordnung, or “IVV”) apply to KfW.

The capital adequacy regime set forth in part 2 titles I through III and part 3 titles I through VI of the CRR has become applicable to KfW by analogy virtually in its entirety with effect from January 1, 2016, including the calculation of regulatory own funds and own funds requirements on a consolidated basis. KfW is also subject to the capital buffers regime introduced by CRD and transposed into national law in Sections 10c through 10i of the KWG. In June 2017, KfW received approval from BaFin to calculate its regulatory capital requirements in accordance with the advanced IRBA for the vast majority of its portfolio as of June 30, 2017. KfW’s total capital ratio according to article 92 of the CRR as well as its Tier 1 capital ratio amounted to 27.9% both as of December 31, 2023 (not taking into account the interim profit of the second half of 2023)¹. The increase of the total capital ratio as well as of the Tier 1 capital ratio compared to the figures as of December 31, 2022, which amounted to 25.2% and 25.0%, respectively, was mainly due to the recognition of the profit of the second half of 2022 and the first half of 2023, as well as a reduced total risk exposure amount resulting from the changed recognition of stuctured funds due to the introduction of the risk-adequate standard approach for securitizations (SEC-SA) in accordance with CRR and rating improvements of banks.

¹  According to article 26(2) CRR.

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In connection with the application of the appropriate requirements of the capital adequacy regime, the overall capital requirement for KfW Group’s total capital ratio as of December 31, 2023 was 16.3%, consisting of a total supervisory review and evaluation process capital requirement (“TSCR”) of 12.25% plus a Capital Conservation Buffer of 2.5%, a buffer for Other Systemically Important Institutions (O-SIIs) in Germany of 1.0%, a systemic risk buffer of 0.02% for risk weighted assets in Norway, which was reciprocally introduced by BaFin in response to the imposition of such a risk buffer for German banks by the Norwegian Central Bank, and a Countercyclical Capital Buffer of 0.55%. The TSCR for KfW Group includes a supervisory review and evaluation process (“SREP”) surcharge, which is generally meant to reflect the specific risk situation of an individual bank. In March 2023, BaFin confirmed KfW Group’s SREP surcharge of 3.0%. In addition, the TSCR for KfW Group includes an additional surcharge for certain IT-, internal auditing- and operational risk management-related findings, which as of December 31, 2023, amounted to 1.25% overall, unchanged compared to 2022.

As of January 1, 2016, KfW, by analogy, became subject to the large-exposures regime of part IV of the CRR as supplemented by the KWG and relevant implementing rules and regulations. Under this regime, exposures to any one client or group of connected clients are limited to 25% of eligible own funds and exposures exceeding 10% of eligible own funds are subject to special internal monitoring requirements and a reporting obligation to the German bank supervisory authorities.

In addition, KfW has been applying the provisions concerning leverage ratio with effect from January 1, 2016 by analogy. Under this regime, the ratio of KfW’s Tier 1 capital to the carrying value of assets and off-balance sheet exposures is calculated on a consolidated basis. The leverage ratio is monitored internally and has been part of the prudential requirements since June 2021.

According to a decision made by BaFin in December 2015, certain provisions of the CRR such as own funds requirements, large exposures and leverage need only be considered at the group level (i.e., on a consolidated basis) and not at the entity level.

Although it was already subject to the German Anti-Money Laundering Act (Geldwäschegesetz), on January 1, 2016 KfW also became subject to the provisions of the KWG concerning money laundering, terrorist financing and other criminal offences at the group and entity levels.

Finally, the bank regulatory requirements for risk management systems set forth in the KWG and in the German Minimum Requirements for Risk Management (Mindestanforderungen an das Risikomanagement, or “MaRisk”) became applicable to KfW by analogy with effect from January 1, 2016, and provide for sound systems for risk strategy planning, the implementation of risk management and financial and operational controls as well as requirements for credit decision-making processes. Certain exemptions are granted in this context for special mandates by the Federal Government (Zuweisungsgeschäfte) in accordance with article 2 paragraph 4 of the KfW Law, i.e., those activities which KfW carries out as requested by the Federal Government, usually at the Federal Republic’s economic risk.

The KfW Regulation does not encompass the application of the liquidity regime set forth in the CRR and the KWG. On the same grounds, KfW is generally exempt from EU and national disclosure requirements and from the EU Bank Recovery and Resolution Directive (Directive 2014/59/EU).

Supervisory Structure and Enforcement Powers

The supervision of KfW’s compliance with bank regulatory laws and regulations is assigned to BaFin in cooperation with Deutsche Bundesbank in accordance with BaFin’s general risk-oriented supervisory review and evaluation process. In this context, Deutsche Bundesbank undertakes the ongoing audit and analysis of banks with regard to both their financial stability and the adequacy of their internal governance and risk-management systems. Deutsche Bundesbank receives and preprocesses relevant data, while final decision-making and the exercise of enforcement powers are reserved for BaFin.

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For purposes of supervision, the KfW Regulation has subjected KfW by analogy to the reporting and information requirements generally applicable to banks in Germany, with the exception of the automated access to client account details, with effect from January 1, 2016. After a transition period agreed with the supervisory authorities, KfW implemented a fully-fledged regulatory reporting system as of January 1, 2020.

In addition, the KfW Regulation subjects KfW by analogy to certain enforcement powers of BaFin, which comprise, among other matters, the right to demand, under certain circumstances, increases of regulatory own funds and/or a reduction of regulatory risk, or to demand changes in the senior management of KfW.

Since KfW does not qualify as a regulated entity under national or EU bank regulatory law, KfW did not become subject to the changes in the national and EU bank supervisory structure that have taken effect in recent years. In particular, KfW is not subject to supervision by the ECB pursuant to Council Regulation (EU) No. 1024/2013 establishing the European Single Supervisory Mechanism (“SSM”). KfW IPEX-Bank was included in the ECB’s comprehensive assessment of large banks conducted in 2014 in cooperation with national supervisory authorities of member states participating in the SSM. According to a decision made by the ECB in September 2014, KfW IPEX-Bank did not qualify as a significant credit institution and to date it has not been qualified as such in connection with subsequent annual reviews of large German financial institutions conducted by the ECB. Accordingly, KfW IPEX-Bank is currently not supervised directly by the ECB, but continues to be supervised by BaFin in cooperation with Deutsche Bundesbank. Given the fact that as of December 31, 2023, KfW IPEX-Bank’s total assets (IFRS, before consolidation) amounted to EUR 32.8 billion, KfW IPEX-Bank may be qualified as a significant credit institution in the near future, which could lead to direct supervision by the ECB from as early as 2025 onwards. For more information on KfW IPEX-Bank, see “Business—Export and Project Finance (KfW IPEX-Bank).” For more information on the SSM, see “Federal Republic of Germany—Monetary and Financial System—Financial System—European Financial System—European System of Financial Supervision and European Banking Union.”

Corporate Background

KfW was established in 1948 by the Administration of the Combined Economic Area, the immediate predecessor of the Federal Republic. Originally, KfW’s purpose was to distribute and lend funds of the European Recovery Program (the “ERP”), which is also known as the Marshall Plan. Even today, several of KfW’s programs to promote the German and European economies are supported using funds to subsidize interest rates from the so-called “ERP Special Fund.” KfW has expanded and internationalized its operations over the past decades. In 1994, following the reunification of the Federal Republic and the former German Democratic Republic (“GDR”), KfW assumed the operations of the former central bank of the GDR (Staatsbank), which was located in Berlin, Germany.

In September 2001, KfW acquired DEG from the Federal Republic. DEG is a limited liability company that acts as the German development finance institution for the promotion of private enterprises in developing countries and emerging economies. For more information on DEG, see “Business—DEG—Deutsche Investitions- und Entwicklungsgesellschaft mbH.”

In 2003, Deutsche Ausgleichsbank (“DtA”), which was based in Bonn, Germany, merged into KfW. DtA was formed in 1950 as a public law institution and promotional bank, and was particularly active in the area of lending to SMEs and start-up businesses. The merger was accomplished through the Promotional Bank Restructuring Act and was designed to restructure and simplify promotional banking in the Federal Republic and harmonize it with the understanding reached with the European Commission.

Sustainable Promotion

KfW Group has set sustainable promotion as its primary strategic objective and aims to improve economic, social and environmental conditions around the world, with an emphasis on promotion of the German economy. For more information on KfW’s strategic objectives, see “Combined Management Report — Basic Information on KfW Group — Strategic Objectives 2028” included in Exhibit (e) to this annual report. Against this background, KfW supports the sustainability goals of the Federal Republic, the EU and the international community and is taking action to help implement the Federal Government’s National Sustainable Development Strategy, to achieve the United Nations’ Agenda 2030 objectives together with its Sustainable Development Goals (“SDGs”) and to put the Paris Agreement into practice. In addition, the new “Policy Statement of KfW and its Subsidiaries on Human Rights and its Human Rights Strategy” from 2023, which replaces the previous “Declaration by KfW Bankengruppe on the consideration of human rights in its business operations” from 2008, reflects the crucial importance of human rights for all of KfW’s activities. Apart from financing investments for a more sustainable economy, KfW, on its own initiative and in cooperation with other financial market participants, strives to set benchmarks and standards for credit and capital markets, to act as a driving force for national and international sustainability initiatives and to offer its expertise to political decision-makers in Germany, Europe and worldwide.

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KfW’s sustainability mission statement, which reflects a holistic approach to addressing the challenge of transitioning to a sustainable society, lays out the framework for KfW’s five sustainability action areas: banking business, bank operation, sustainability management, sustainability communications and employee relations. For more information on KfW’s approach to employee relations, see “Management and Employees—Employees.”

Banking Business

In its financing activities, KfW focuses on the social and economic megatrends of “climate change and the environment,” “globalization,” “social change,” as well as “digitalization and innovation.” Due to the particular importance of the “climate change and the environment” megatrend, KfW has been aiming to maintain an environmental ratio of at least 38% for its new commitments since 2020 as part of its strategic management system. In 2023, the environmental ratio was 35% (compared to 36% in 2022). KfW’s environmental ratio reflects the percentage of KfW’s loan commitments for activities in the fields of climate protection (such as renewable energy, energy-efficient projects, sustainable mobility or climate change adaptation) and the protection of resources and environment (such as waste avoidance, wastewater treatment, air pollution control or noise protection) in relation to KfW’s overall new loan commitments for a certain period. To qualify for the calculation of the environmental ratio, the loan commitments taken into account also have to fulfill certain minimum requirements, for example, in terms of CO₂ or energy reductions to be achieved by the projects which are financed with these commitments. Adjusted for loan facilities related to the energy crisis, the environmental ratio was 45% (compared to 59% in 2022). For information on the loan facilities related to the energy crisis, see “Business—Domestic Promotional Business—KfW measures to mitigate the economic impact in Germany of Russia’s invasion of Ukraine.” The decline in the adjusted environmental ratio was mainly driven by a record volume of environmental financing in KfW’s domestic business in 2022 due to the launch of newly designed programs. In addition, KfW is committed to contributing to the achievement of each of the 17 SDGs, which are part of the United Nations’ Agenda 2030 for Sustainable Development, under its promotional and financing mandate. To create transparency, KfW has developed a group-wide reporting method by mapping new commitments to the SDGs. While new commitments in 2023 contributed to all 17 SDGs, the most significant contributions were made to SDG 8 “Decent Work and Economic Growth”, SDG 7 “Affordable and Clean Energy” and SDG 13 “Climate Action.”

In terms of customers, important target groups for KfW’s activities include Germany’s small- and medium-sized enterprises, private households, municipalities, developing countries, as well as export and project finance borrowers. KfW takes ecological and social factors into account in every financing decision based on specific sustainability guidelines, which are in place for all its business sectors. In the case of promotional and project financing in developing countries and emerging economies, as well as in all export and project finance activities around the world, KfW regularly applies internationally recognized environmental and social standards (Environmental and Social Impact Assessment). KfW refuses to fund projects that could conceivably cause unacceptable environmental or social harm, and the group-wide Exclusion List of KfW Group applies to all new financing and promotional activities. In 2021, KfW introduced science-based sector guidelines in accordance with the targets of the Paris Climate Agreement as an additional element to steer KfW’s new financing activities in particularly greenhouse-gas-intensive sectors. Initially, these Paris-compatible sector guidelines were aligned with the 1.65°C climate target. In 2022, KfW revised the sector guidelines to align with the 1.5°C climate target with the aim of providing even more targeted support for the transformation process towards greenhouse gas neutrality. The revised sector guidelines covering the sectors automotive, iron and steel production, building, power generation, aviation and shipping were implemented at the beginning of 2023. In December 2023, KfW introduced an additional sector guideline for the oil and gas sector.

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Sustainability also plays an important role in KfW’s various capital market activities, be it in its role as a green bond issuer and investor or in connection with the sustainable management of its liquidity portfolio. For more information, see “Business—Financial Markets.”

KfW is conscious of the fact that environmental and climate risks, as well as risks arising from poor governance and insufficient social considerations, can have a significant impact on its credit risk positions, as well as on economic and financial systems in general. As a consequence, KfW strives to continuously improve the assessment of its risk positions with a view to gaining a clear picture of the significance of environmental, climate, governance and social aspects as risk drivers. To this end, in 2023, KfW collected environmental, social and governance (“ESG”) risk profiles from banking, corporate, fund and securitization clients for the first time. Sovereign clients will be included in this initiative in 2024.

KfW’s Sustainability Report 2023, which was published in April 2024, complies with the Core option of the Global Reporting Initiative (GRI) standards and also contains KfW Group’s non-financial report in accordance with the German Commercial Code (Handelsgesetzbuch). Based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the report includes a special chapter outlining KfW’s climate-related risks and associated processes in a transparent manner. KfW is preparing to publish a report in accordance with the Corporate Sustainability Reporting Directive (CSRD, Directive (EU) 2022/2464) for fiscal year 2024 in 2025.

Banking Operations

The regulatory framework applicable to KfW’s activities explicitly includes compliance with legal rules and regulations relating to environmental, social and economic matters, as well as the prevention of money laundering, terrorist financing, corruption, fraud, breaches of data protection, insider trading and embargo provisions. In addition, as a public law institution, KfW adheres to the principles of the Federal Government’s Public Corporate Governance Code. Furthermore, KfW is a corporate member of Transparency International and DEG represents KfW Group in its capacity as a supporting member of the Extractive Industries Transparency Initiative. While adverse environmental impacts caused by KfW’s banking operations are limited, KfW strives to reduce the ecological footprint of its banking operations and compensates the remaining greenhouse gas emissions of KfW Group by purchasing high-value Clean Development Mechanism (CDM) credits on the market and discontinuing them for perpetuity. Among other matters, KfW’s procurement guidelines require that suppliers and potential subcontractors comply with the prohibition of child and forced labor and afford protection against inhumane working conditions. Within the scope of possibilities provided by public procurement law, KfW includes social and ecological requirements in its contract conditions for Europe-wide tenders.

Sustainability Management System and Sustainability Communications

KfW’s sustainability management system establishes responsibilities and procedures to further develop sustainability matters within KfW Group. Overall responsibility for the group’s sustainability strategy and communication rests with KfW’s Chief Executive Officer who is supported by sustainability officers and managers at the group, business sector, central unit and site levels. Specific sustainability guidelines for the business sectors and relevant central units set out detailed rules.

To ensure continuous progress of the group-wide sustainability commitment, beginning in 2023, KfW’s strategic objectives have included as one of its key targets its ranking among the top three development and promotional banks within a peer group, which comprises the top 10 rated development and promotional banks across the peer groups of each of three ESG Rating agencies (ISS, MSCI & Sustainalytics). For these purposes, KfW standardizes the scores achieved by itself and its peers in the rating processes performed by each of the relevant ESG rating agencies. KfW then uses the standardized scores to calculate an average score for itself and each peer, which determines its own ranking in relation to these peers.

KfW regularly interacts openly with its stakeholders about aspects of its business activity related to sustainability with a view to refining its own sustainability goals and enabling stakeholders to address relevant topics. In this context, KfW’s Sustainability Report, which also fulfills statutory requirements, and KfW’s Sustainability Portal are important communication channels.

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Financial Statements and Auditors

The consolidated financial statements of KfW included in Exhibit (e) to this annual report have been prepared in accordance with IFRS as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e (1) of the German Commercial Code (Handelsgesetzbuch) and supplementary provisions of the KfW Law. IFRS differs in certain significant respects from accounting principles generally accepted and financial reporting practices followed in the United States (“U.S. GAAP”), and, as a result, KfW’s consolidated financial statements included in Exhibit (e) to this annual report may differ substantially from financial statements prepared in accordance with U.S. GAAP.

Pursuant to the KfW Law, KfW’s unconsolidated annual financial statements as well as its consolidated financial statements are examined by a Wirtschaftsprüfer (Certified Public Accountant) who is appointed by the Federal Minister of Finance at the proposal of the Board of Supervisory Directors in consultation with the Federal Court of Auditors (Bundesrechnungshof). KfW’s external auditor for the fiscal year ended December 31, 2023 is Deloitte GmbH Wirtschaftsprüfungsgesellschaft (“Deloitte”).

The annual audit is conducted in accordance with German Generally Accepted Auditing Standards.

The auditor’s report of Deloitte for the fiscal year ended December 31, 2023, dated March 6, 2024, refers to a combined management report (zusammengefasster Lagebericht). The examination of, and the auditor’s report upon, this combined management report are required under German generally accepted accounting principles. This examination was not made in accordance with U.S. generally accepted auditing standards (“U.S. GAAS”) or U.S. attestation standards. Therefore, Deloitte does not provide any opinion on such examination, on the combined management report or on the financial statements included in Exhibit (e) to this annual report in accordance with U.S. GAAS or U.S. attestation standards. A reprint of the auditor’s report can be found starting on page 180 of Exhibit (e) to this annual report.

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BUSINESS

Introduction

KfW conducts its business in the following business sectors:

• SME Bank & Private Clients (Mittelstandsbank & Private Kunden);

• Customized Finance & Public Clients (Individualfinanzierung & Öffentliche Kunden);

• KfW Capital;

• Export and Project Finance (KfW IPEX-Bank);

• KfW Entwicklungsbank (KfW Development Bank);

• DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH; and

• Financial Markets.

The following table sets forth the relative size of each of the business sectors in terms of commitments for each of the years indicated.

PROMOTIONAL BUSINESS VOLUMEBY BUSINESSSECTOR

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)				(in %)
SME Bank & Private Clients (Mittelstandsbank & Private Kunden)		39,117		64,839		-40
Customized Finance & Public Clients (Individualfinanzierung & Öffentliche Kunden)		35,852		69,970		-49
KfW Capital		2,129		1,259		69
Export and project finance (KfW IPEX-Bank)		24,152		18,120		33
KfW Entwicklungsbank (KfW Development Bank)		9,040		10,931		-17
DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH		1,869		1,644		14
Financial markets		480		415		16
Total promotional business volume (1) (2)		111,312		166,938		-33

(1) Total promotional business volume for the full year ended December 31, 2023 has been adjusted for commitments of EUR 1.3 billion, compared to EUR 241 million for the corresponding period in 2022, made by KfW IPEX-Bank relating to export and project finance and refinanced under certain promotional programs of SME Bank.

(2) Commitments represent the volume of funds committed for loans and other business transactions (with the exception of global funding facilities and program-based global loans to Landesförderinstitute) in the relevant period, including amounts to be disbursed in future periods, and do not include amounts disbursed in the relevant period pursuant to commitments made in prior periods. In the case of global funding facilities and program-based global loans to the Landesförderinstitute, commitments represent the actual volume of funds disbursed in the relevant period.

The following table shows the relative size of each of the seven business sectors in terms of percentage of commitments outstanding and economic capital required as of December 31, 2023. In general, a lower percentage in economic capital required compared to the percentage of commitments outstanding illustrates a below average risk associated therewith. The percentage of economic capital required of the business sector Financial Markets also includes the economic capital required for treasury activities.

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RELATIVE SIZEOF EACH BUSINESS SECTOR

	As of December 31, 2023
	Commitments outstanding			Economic capital required (1)
	% of total
SME Bank & Private Clients		50	%		22	%
Customized Finance & Public Clients		17	%		3	%
KfW Capital		0	%		4	%
Export and Project Finance		14	%		15	%
KfW Entwicklungsbank		7	%		3	%
DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH		2	%		8	%
Financial Markets		10	%		8	%
Total (in EUR billions)		640.1			19.0

(1) The balance of economic capital required relates to group functions. The economic capital required has been calculated based on a solvency level of 99.90%. For more information concerning economic capital required of KfW Group, see “Combined management report—Risk report—Risk management approach of KfW Group (overview)—Internal capital adequacy assessment process—Economic risk-bearing capacity” included in Exhibit (e)  to this annual report.

Domestic Promotional Business

General

To support the economic and policy objectives of the Federal Government, KfW offers a broad range of financing programs in Germany and, to a limited extent, elsewhere in Europe, as well as grants funded from the federal budget for domestic promotional purposes. KfW’s main domestic finance activities are conducted by the business sectors SME Bank & Private Clients, Customized Finance & Public Clients, and by KfW Capital. Certain further promotional activities undertaken in connection with KfW’s green bond portfolio and ABS portfolio targeting the domestic market are reported under the Financial Markets business sector.

Under the KfW Law, KfW must generally involve banks or other financing institutions when granting financing. Therefore, KfW involves commercial banks in the handling of its loans by extending loans to commercial banks, which, in turn, on-lend the funds to the ultimate borrowers. To a limited extent, however, KfW is allowed to grant financing directly to ultimate borrowers (e.g., for the financing of municipalities). By lending to commercial banks, KfW, in principle, insulates itself from credit exposure to ultimate borrowers and gains the benefit of the commercial banks’ knowledge of their customers as well as their administrative and servicing expertise. KfW monitors its exposures to, and the credit standing of, each bank or other financing institution to which it lends. As of December 31, 2023, KfW had extended loans to approximately 150 commercial banks in its domestic business sectors. In 2023, 60% (2022: 62%) of KfW’s total interbank exposure (exposure at default) was attributable to KfW’s ten largest banking group counterparties. Most of this exposure relates to KfW’s on-lending business, while the portion deriving from other business transactions – including derivatives, securities, money market and global loan transactions – is much more limited.

KfW offers two different models for processing KfW loans to commercial banks. KfW’s traditional and most important model for handling its lending business is based on individual loan applications by each borrower within the framework of specified loan or mezzanine capital instruments. Under the other model, KfW extends global funding facilities and program-based global loans to Landesförderinstitute, as well as non-program-based global loans to selected financial institutions in Germany and Europe.

Individual Loans

KfW defines detailed formal eligibility requirements for each individual loan that it extends to a commercial bank, as well as for each loan the commercial bank on-lends to the ultimate borrower under each of KfW’s lending programs. Borrowers generally do not apply directly to KfW for a loan, but rather may only apply for a KfW loan through a commercial bank. This intermediate bank appraises the financial and business situation of the applicant, takes collateral for the loan and assumes liability for repayment to KfW. KfW loans on-lent by commercial banks are normally collateralized by liens on real property or other assets, or are guaranteed by the Federal Republic or by one of the Länder. The processing of individual loans within KfW’s lending programs is characterized by two formally separate loan approvals – first by the intermediate bank and then by KfW. KfW’s loan approval, however, in most cases depends solely on a review of the individual loan application in order to assess compliance with the requirements defined for each respective lending program.

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In recent years, KfW has modernized its application and approval process for loans with the aim of attaining a more efficient, automated and accelerated process. For this purpose, KfW has developed a digital online platform for its standardized loan programs. The online platform provides immediate feedback as to KfW’s approval of loans in the form of electronic confirmations for most applications, and electronic confirmations after manual processing by KfW for more complex products (for instance, environmental programs for SMEs, municipal enterprises, businesses, and non-profit organizations). Since the beginning of 2020, all of KfW’s standardized domestic, commercial and non-direct municipal products are offered exclusively via the online platform. All intermediate banks have access to the online platform and use it for their application processes.

KfW applies either a fixed-rate pricing model or a risk-adjusted pricing model to the loans it grants. Under the fixed-rate pricing model, the commercial banks to which KfW lends are permitted to on-lend these funds at fixed spreads over the applicable interest rate payable to KfW. This fixed-rate pricing model is applied to housing investment and some lending programs for start-up financing. It is also applied to education lending programs. Under the risk-adjusted pricing model, KfW establishes pricing categories based on a combination of the borrower’s creditworthiness and the collateral securing the loan. Under each lending program, KfW sets maximum interest rates for each pricing category. The on-lending banks assess the risk profile of the ultimate borrower and the collateral securing the loan to determine the applicable pricing category for each loan and the applicable maximum interest rate for the pricing category. KfW’s role in the pricing process is limited to verifying that banks derive the appropriate maximum interest rate from the ultimate borrower’s creditworthiness and the collateral provided.

Under KfW’s traditional SME lending programs, the on-lending banks are liable to KfW and bear the risk of customer default as described above. In recent years, KfW has constantly been reworking and renewing its SME financing programs to increase its support for SMEs. Under some of those lending programs, to which the risk-adjusted pricing model applies, KfW offers the option of a partial exemption from liability to on-lending banks. If the on-lending bank applies for an exemption from liability, KfW bears the risk not retained by the bank and the risk margin is shared pro rata between KfW and the bank. The risk-adjusted pricing model applies to most of SME Bank & Private Clients lending programs. In addition, mezzanine capital offered by SME Bank & Private Clients and its special programs for investments by micro-enterprises are designed so that KfW assumes direct exposure to the credit risk of the ultimate borrowers, which in turn is covered or compensated in different ways: by means of risk premiums included in the interest rate charged to the ultimate borrowers, or by means of guarantees from the Federal Government or the European Investment Fund.

Global Loans and Global Funding Facilities

Global loans and global funding facilities differ from KfW’s individual loans primarily in terms of simplified processing, the lack of a requirement for formal loan approval by KfW with respect to each individual ultimate borrower and, in general, a higher degree of flexibility for the on-lending Landesförderinstitute and selected financial institutions. KfW expects the receiving institutions to on-lend funds within a reasonable period of time. In contrast to KfW’s individual loans, global loans and global funding facilities offer greater loan-structure flexibility. As a result, these instruments, when compared with KfW’s traditional lending programs, carry lower administrative costs for both KfW and the on-lending institutions. Accordingly, ultimate borrowers generally benefit from favorable interest rates.

KfW offers different kinds of global loans and global funding facilities: program-based global loans and global funding facilities to Landesförderinstitute and non-program-based global loans to selected financial institutions in Germany and Europe. Most Landesförderinstitute are independent public law institutions and benefit from explicit statutory guarantees by the respective Land. Each Landesförderinstitut is responsible for promotional matters within its federal state.

Landesförderinstitute use KfW’s program-based global loans to finance specified investments relating to SMEs, housing projects and municipal infrastructure projects in their respective Land within the framework of cooperative loan programs of the respective Landesförderinstitut and KfW. The conditions of each cooperative loan program are required to comply with the conditions of the relevant KfW program. The funds to Landesförderinstitute are generally extended in the form of lump sums, which are then broken down and granted to ultimate borrowers as individual loans.

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Moreover, KfW extends global funding facilities exclusively to Landesförderinstitute for their own promotional funding purposes, thus offering flexibility with respect to the use of funds extended in their promotional business without a direct link to any of KfW’s lending programs.

In 2023 KfW launched a new type of global loans to Landesförderinstitute, the RegioInnoGrowth (“RIG”) loans. These loans, which are part of the “Future Fund” (Zukunftsfonds)/ERP, are intended to provide equity and equity-like capital to start-ups and growth-oriented SMEs with innovative business models.

KfW also extends non-program-based global loans to selected financial institutions in Germany and elsewhere in Europe, which these institutions on-lend as individual loans and leases to finance SMEs, housing projects and energy efficiency projects. In 2023, KfW began to extend global loans which are designed to promote SME-leasing investments in sustainable and energy efficiency projects.

KfW Measures to Mitigate the Economic Impact in Germany of Russia’s Invasion of Ukraine

While KfW’s direct exposures in Ukraine and Russia are limited and tightly managed, developments related to Russia’s invasion of Ukraine have affected KfW’s business and earnings position. For information on the impact of Russia’s invasion of Ukraine on KfW’s net assets, financial and earnings position, see “Combined management report—Economic Report” in Exhibit (e) to this annual report.

Special Mandates by the Federal Government

Against the background of Russia’s invasion of Ukraine, which led to further increases in energy prices and highlighted Germany’s dependency on energy imports from Russia, the Federal Government requested that KfW engage in a number of activities under special mandates in accordance with article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft) with full protection of KfW. These activities aim to stabilize and secure the energy supply in Germany, strengthen the resilience of Germany’s economy and are thus in the public interest as required by the KfW Law. These activities are being carried out at the Federal Republic’s economic risk.

KfW’s activities under special mandates by the Federal Government are of an unplanned nature and do not change KfW’s consistent strategic focus on sustainability targets in its banking business. They must therefore be clearly distinguished from KfW’s promotional activities as a digital transformation and promotional bank of the Federal Government and the Länder. As of December 31, 2023, these activities, which were mainly conducted in 2022, in particular comprised support measures for systemically important companies in the energy sector that were significantly impacted by the supply reductions and significantly higher gas and electricity prices resulting from Russia’s invasion of Ukraine. Debt financing has been committed for gas replacement purchases, to cover short-term liquidity requirements within the scope of “margining” (i.e., the provision of collateral that is mandatory when trading in energy) and to finance the procurement of natural gas for the fulfilment of certain statutorily required levels of natural gas reserves in natural gas storage facilities throughout Germany. As of December 31, 2022, these activities by KfW had led to commitments of EUR 54.2 billion and disbursements to EUR 22.4 billion, whereas as of December 31, 2023, commitments and disbursements had declined signficantly to EUR 11.5 billion and EUR 8.4 billion, respectively. KfW has also been mandated to engage in equity financing, see “Strategic Shareholdings—KfW’s Shareholdings Pursuant to Special Mandates of the Federal Government—German LNG Terminal GmbH” below.

Furthermore, at the end of 2022, the Federal Government mandated KfW to act as paying agent in connection with compensatory payments to utility companies for loss of revenues owed to such companies by the Federal Government in connection with government support measures aimed at reducing the burden of high energy costs for end consumers of natural gas and district heating. KfW’s role in making the compensatory payments is strictly limited to the payments’ disbursement, with the Federal Government providing KfW with the funds necessary to make such payments in advance. Commitments in this context amounted to EUR 4.1 billion in 2022 and EUR 13.7 billion in 2023.

In the aggregate, activities under special mandates by the Federal Government due to Russia’s invasion of Ukraine have led to commitments in an aggregate amount of EUR 58.3 billion in 2022 and, in particular, impacted KfW’s commitments in the business sector Customized Finance & Public Clients, which increased from EUR 9.5 billion in 2021 to EUR 70.0 billion in 2022. This effect was less pronounced in 2023, when these activities amounted to commitments in an aggregate amount of EUR 25.2 billion, which resulted in a decline in KfW’s commitments in the business sector Customized Finance & Public Clients from EUR 70.0 billion in 2022 to EUR 35.9 billion in 2023.

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Against this background, in November 2022, the German Economic Stabilization Fund (Wirtschaftsstabilisierungsfonds – WSF) was authorized to provide loans to KfW to cover KfW’s refinancing needs stemming from its support of companies in the energy sector under special mandates by the Federal Government with unallocated funds from the WSF’s credit authorization of up to EUR 100 billion, which was granted to KfW in March 2020 in the context of the COVID-19 pandemic with a view to refinancing KfW’s commitments under the KfW Special Program. In addition, the WSF was authorized to provide financing to KfW under a EUR 200 billion credit authorization, which it has been granted to cover funding requirements in connection with a EUR 200 billion protective shield announced by the Federal Government in September 2022, to the extent that KfW is mandated by the Federal Government in connection with the protective shield. Refinancing through the WSF in 2022 and 2023 relating to the support of companies in the energy sector amounted to EUR 19.8 billion and EUR 4.9 billion, respectively. The WSF is administered by the Federal Finance Agency (Bundesfinanzagentur) and its refinancing is ensured by the Federal Finance Agency, as part of the Federal Government’s established money and capital market approach to financing the Federal Budget, and the Federal Government’s special funds.

Depending on further developments with respect to Russia’s invasion of Ukraine, the Federal Government may in principle request KfW to engage in further activities under special mandates at any time.

KfW Special Program UBR 2022

In May 2022, KfW launched a loan program known as the “KfW Special Program UBR 2022” (KfW-Sonderprogramm UBR 2022, with “UBR” standing for “Ukraine, Belarus and Russia”) in an aggregate amount of up to EUR 7.0 billion to swiftly safeguard the liquidity of certain companies demonstrably affected by the war in Ukraine. Mostly privately owned companies of all sizes and from many different sectors were able to receive access to low-interest loans in an amount of up to EUR 100 million with extensive liability exemption of their regular banks. A syndicate financing alternative with substantial risk assumption was also offered. The Federal Republic has undertaken to bear all financial risks incurred by KfW in connection with the KfW Special Program UBR 2022. Commitments made under the KfW Special Program UBR 2022 in 2023 amounted to EUR 91 million compared to EUR 148 million. As planned, the program expired at the end of 2023.

SME Bank & Private Clients

KfW’s SME Bank & Private Clients business sector supports SMEs, large-scale enterprises, business founders, start-ups and self-employed professionals, and offers financing for various purposes to companies in different stages of development. Additionally, this business sector extends housing-related loans and grants as well as financing for education to private individuals. Financing is provided primarily by means of loan programs (2023: EUR 38.7 billion, 2022: EUR 45.5 billion), mezzanine programs (2023: EUR 11 million, 2022: EUR 133 million) and grant-based programs (2023: EUR 375 million, 2022: EUR 19.2 million).

In 2023, SME Bank & Private Clients committed financing to improve social living conditions and to support the German economy in an amount of EUR 39.1 billion (2022: EUR 64.8 billion). The following table shows commitments by fields of promotional activity for each of the years indicated.

SME BANK & PRIVATE CLIENTS COMMITMENTS

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in billions)					(in %)
SME Bank		20.4		33.1		-38
Start-up financing and general investment		7.7		11.6		-34
Innovation		1.5		1.9		-24
Environmental investment		11.2		19.5		-42
Private Clients		18.8		31.8		-41
Housing investment programs		4.6		4.1		13
Education programs		1.9		1.9		-1
Environmental investment		12.3		25.8		-52
Total commitments (1)		39.1		64.8		-40

(1) Commitments represent the volume of funds committed for loans and other business transactions (with the exception of program-based global loans to Landesförderinstitute) in the relevant year, including amounts to be disbursed in future years, and do not include amounts disbursed in the relevant year pursuant to commitments made in prior years. In the case of program-based global loans to the Landesförderinstitute, commitments represent the actual volume of funds disbursed in the relevant period.

22

The commitment volume in SME Bank in 2023 decreased compared to 2022. This development was mainly due to a significant reduction in funding in the BEG programs for higher energy efficency standards, which was reflected in the decline in commitments in Environmental investment, and the expiry of some special programs, such as the KfW Entrepreneurial Loan Corona (KfW-Unternehmerkredit Corona) and the KfW Instant Loan (KfW-Schnellkredit), which is reflected in the decrease of commitments in Start-up Financing and general investment.

In 2023, commitments in Environmental investment for Private Clients decreased compared to 2022. The decline was due to an amendment of the promotional guidelines, which introduced higher energy efficiency standards.

SME Bank

According to a representative KfW survey in the German SME sector, known as KfW SME Panel, Germany had an estimated 3.8 million SMEs (defined for the purposes of the survey as companies with an annual group turnover of up to EUR 500 million) in 2022.

SME Bank primarily offers loan programs. Under some loan programs, SME Bank offers a partial exemption from liability to on-lending banks. If an on-lending bank applies for an exemption from liability, KfW bears the risk not retained by the bank and the risk margin is shared pro rata between KfW and the bank.

SME Bank also extends mezzanine capital in the form of unsecured subordinated loans, which contain equity-like elements, combining characteristics of debt and equity capital. In these financings, on-lending banks are not liable to SME Bank for the subordinated loans. The interest rate of these loans takes into account the prevailing rates in the capital markets as well as the borrower’s credit standing and collateral securing the loans. The borrower’s creditworthiness is first assessed by the on-lending bank. However, as KfW assumes the credit risk of the loan, it reserves the right to review and, if necessary, to revise the on-lending bank’s assessment by applying KfW’s own rating standards.

Start-up Financing and General Investment Programs

SME Bank provides start-up financing and financial support for general investments for a wide range of purposes, such as investments in property and buildings, in plants or in machinery and equipment. In 2023, commitments in this field amounted to EUR 7.7 billion compared to EUR 11.6 billion in 2022. This was primarily due to a significantly reduced demand for financings extended under the KfW Special Program, for which the application deadline expired as of June 30, 2022.

Commitments under the KfW Special Program UBR 2022 amounted to EUR 91 million in 2023 compared to EUR 148 million in 2022 and related to low-interest loans, while no commitments were made with respect to the syndicate financing alternative also being offered.

Innovation Programs

SME Bank provides financing for innovations by extending funds for research, development, and digitalization activities, either by providing loans or mezzanine capital. Commitments in the field of innovation financing, with the ERP Promotion for Innovation and Digitalization program being the main contributor, amounted to EUR 1.5 billion in 2023 compared to EUR 1.9 billion in 2022.

Environmental Investment Programs

SME Bank finances environmental protection projects, in particular for measures aiming at increasing energy and resource efficiency, reducing greenhouse gas emissions, or intensifying the use of renewable energy sources. Commitments under SME Bank’s environmental investment programs decreased significantly by EUR 8.3 billion to EUR 11.2 billion in 2023 compared to EUR 19.5 billion in 2022, with demand for renewable energy programs declining to EUR 5.5 billion in 2023 compared to EUR 7.1 billion in 2022. The decline in demand for renewable energy programs was mainly due to increased material costs, supply chain issues and a lack of funding opportunities due to the currently high ECB reference interest rate.

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KfW’s SME Climate Protection Facility (KfW Klimaschutzoffensive für Mittelstand) continued to contribute to the overall growth in commitments under the SME Bank’s environmental investment programs in 2023. Commitments rose to EUR 1.5 billion in 2023 compared to EUR 732 million in 2022.

Private Clients

Housing Investment Programs

Housing investment programs in Private Clients provide funds for the promotion of home ownership and the accessibility to or within existing homes. Some of these programs are promoted by federal grants or subsidized through interest rate reductions paid for by federal funds. Commitments in 2023 increased to EUR 4.6 billion from EUR 4.1 billion in 2022, of which EUR 4.2 billion (2022: EUR 3.1 billion) were granted for home ownership promotion programs.

Education Programs

Private Clients supports students and employees in higher education and advanced occupational training with direct loans. Some of these programs are covered by a credit guarantee of the Federal Government and Länder. In 2023, KfW’s commitments remained stable at EUR 1.9 billion. Commitments under the KfW Student Loan Program amounted to EUR 0.3 billion in 2023 (2022: EUR 0.5 billion).

Environmental Investment Programs

The environmental investment programs registered a decrease in 2023 compared to 2022. The decrease was due to a reorganization of the promotion guidelines, mainly the inclusion of higher energy requirements and a greater emphasis being placed on greenhouse gas emissions in the lifecycle of buildings.

Customized Finance & Public Clients

KfW’s Customized Finance & Public Clients (Individualfinanzierung & Öffentliche Kunden) business sector provides individual financing solutions for municipal and social infrastructure projects, offers corporate loans and project financing and grants global funding instruments to the Landesförderinstitute and other financial institutions.

The following table shows Customized Finance & Public Clients’ commitments by field of promotional activity for each of the years indicated:

CUSTOMIZED FINANCE & PUBLIC CLIENTS COMMITMENTS

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)					(in %)
Municipal infrastructure programs		18,805		11,192			68
Corporate loans and project finance		11,906		54,647			-78
Global funding facilities to Landesförderinstitute (1)		3,668		2,823			30
Program for the refinancing of export loans		774		307			>100
Global loans to selected financial institutions		700		1,000			-30
Total commitments (2)		35,852		69,970			-49

(1) Including global loans to Landesförderinstitute to support start ups and small enterprises, in 2022 as part of the COVID-19 measures and in 2023 through RIG loans.

(2) Commitments represent the volume of funds committed for loans and other business transactions (with the exception of global funding facilities and program-based global loans to Landesförderinstitute) in the relevant period, including amounts to be disbursed in future periods, and do not include amounts disbursed in the relevant period pursuant to commitments made in prior periods. In the case of global funding facilities and program-based global loans to the Landesförderinstitute, commitments represent the actual volume of funds disbursed in the relevant period.

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Commitments in the business sector Customized Finance & Public Clients amounted to EUR 35.9 billion in 2023. This elevated figure includes prolongations of commitments made in connection with special mandates by the Federal Government to secure Germany’s energy supply and also comprises commitments for compensatory payments disbursed by KfW as paying agent in the context of government support measures to mitigate high energy costs. With regard to the core business, commitments decreased from EUR 11.4 billion to EUR 10.7 billion. In 2022, commitments amounted to EUR 70.0 billion and were characterized even more strongly by special Federal Government mandates induced by the energy crisis. The decrease in 2023 therefore partly reflects a normalization of demand.

Municipal Infrastructure Programs

Customized Finance & Public Clients provides financing for investments in municipal and social infrastructure, either as direct loans to municipalities (i.e., local and municipal authorities and municipal special-purpose associations) or through KfW’s ordinary on-lending scheme involving commercial banks. The latter is used for infrastructure investments by private companies that are majority-owned by municipal authorities and social investments made by non-profit organizations. Some of the municipal infrastructure programs are subsidized by federal funds. In total, commitments for municipal infrastructure programs increased significantly by EUR 7.6 billion to EUR 18.8 billion in 2023 from EUR 11.2 billion in 2022. This increase was due to KfW’s role as paying agent in the context of government support measures to mitigate high energy costs. For more information see, “Domestic Promotional Business—KfW measures to mitigate the economic impact in Germany of Russia’s invasion of Ukraine—Special mandates by the Federal Government.”

Global Loans and Global Funding Facilities

The following table shows Customized Finance & Public Clients’ commitments designated to global loans and global funding facilities for each of the years indicated:

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)					(in %)
Global funding facilities to Landesförderinstitute (1)		3,668		2,823		30
Program-based global loans to Landesförderinstitute		760		607		27
Non program-based global loans to selected financial institutions in Germany and Europe		700		1,000		30
Total commitments (2)		5,128		4,430		16

(1) Including global loans to Landesförderinstitute to support start-ups and small enterprises, in 2022 as part of the COVID-19 measures and in 2023 through RIG loans.

(2) Commitments represent the volume of funds committed for loans and other business transactions (with the exception of global funding facilities and program-based global loans to Landesförderinstitute) in the relevant period, including amounts to be disbursed in future periods, and do not include amounts disbursed in the relevant period pursuant to commitments made in prior periods. In the case of global funding facilities and program-based global loans to the Landesförderinstitute, commitments represent the actual volume of funds disbursed in the relevant period.

Customized Finance & Public Clients also grants global loans to selected financial institutions in Germany in order to refinance leasing contracts to SMEs, as well as to selected financial institutions in Europe in order to cooperate in the field of SME financing in Europe. The financial institutions in turn break down the global loans and extend individual loans and leases to SMEs. In 2023, global loans to selected financial institutions in Germany and Europe decreased to EUR 0.7 billion compared to EUR 1.0 billion in 2022. This amount is fully attributable to the refinancing of leasing contracts.

The increase in Global Funding Facilities to Landesförderinstitute was due to higher refinancing demands by Landesförderinstitute, driven by higher market volatility in light of increasing interest rates and less liquidity in capital due to the ECB’s changed monetary policy and the run-down of the Eurosystem’s targeted longer term refinancing operations (TLTROs).

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Program for the Refinancing of Export Loans

Customized Finance & Public Clients offers commercial banks long-term refinancing of export loans covered by an official export credit guarantee of the Federal Government referred to as “Hermes Cover.” These guarantees are managed by Euler Hermes Aktiengesellschaft (“HERMES”) on behalf and for the account of the Federal Government. For more information on HERMES, see “Export and Project Finance (KfW IPEX-Bank)—Business.” In 2023, KfW made commitments of EUR 0.8 billion (2022: EUR 0.3 billion) under this program. In 2023, commitments were back at an average level after a lack of larger projects had lowered commitments in 2022.

Corporate Loans and Project Finance

Customized Finance & Public Clients provides corporate loans, project financing and some equity financing. Excluding commitments of EUR 11.5 billion in connection with the support of companies in the energy sector under special mandates by the Federal Government, KfW’s commitments in corporate loans and project financing in 2023 were characterized by a normalized credit demand. The situation was similar to 2022, where commitments in connection with the support of companies in the energy sector under special mandates by the Federal Government were even higher, amounting to EUR 54.2 billion.

KfW Capital

KfW Capital, KfW’s venture capital subsidiary, was incorporated as a legally independent entity on August 31, 2018. KfW Capital’s general partner, KfW Capital Verwaltungs GmbH, is wholly-owned by KfW Capital and was incorporated on August 9, 2018. KfW acts as the limited partner and ultimately is the sole owner of KfW Capital. In the course of 2021, KfW Capital obtained a license as a Class 2 investment firm, i.e., a medium-sized investment firm (Mittleres Wertpapierinstitut) pursuant to the German Securities Institution Act (Wertpapierinstitutsgesetz, WpIG), the German law based on the EU Investment Firm Directive 2019/2034 (IFD) and Investment Firm Regulation 2019/2033 (IFR). As a medium-sized investment firm, KfW Capital is subject to this specific regulatory regime.

The business objective of KfW Capital is to invest in German and European venture capital and venture debt funds with the aim of improving access to capital for innovative technology-oriented growth companies in Germany through professionally managed funds with a minimum fund size of EUR 50 million. At present, KfW Capital only invests in funds and does not invest directly in companies. For the coming years, the targeted average investment volume is around EUR 400 million per year. KfW Capital intends to invest up to a maximum of EUR 75 million into a fund’s capital and to acquire a maximum of 19.99% of a fund’s capital and voting rights. Since 2021, KfW Capital has also been mandated on behalf of the Federal Government to promote future technologies through the “Future Fund” (Zukunftsfonds). Under the Future Fund, KfW Capital invests its own funds at its own risk (“Future Fund KfW Capital”) as well as government funds on a fiduciary basis (“Future Fund Federal Republic”).

Commitments related to KfW Capital amounted to EUR 2.1 billion in 2023, compared to EUR 1.3 billion in 2022. This increase was mainly driven by significantly higher commitments made under the Future Fund Federal Republic program, due to first-time commitments into the DeepTech & Climate Fund (EUR 215 million) and the European Tech Champions Initiative (EUR 800 million). Apart from the fiduciary investments under the Future Fund Federal Republic program, commitments of KfW Capital in 2023 mainly reflected investments of EUR 181 million under the ERP/Zukunftsfonds Growth Facility, EUR 44 million under the Green Transition Facility (both Future Fund KfW Capital) and EUR 246 million via the ERP Venture Capital Fund investment program. Investments under the Future Fund KfW Capital program declined in line with expectations due to KfW Capital’s one-time investment into the Wachstumsfonds Deutschland I in 2022. Investments under the Future Fund program of the Federal Republic are guaranteed by the Federal Republic and funding for these programs is refinanced by KfW.

The following table shows the commitments of KfW Capital for each of the years indicated:

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KFW CAPITAL COMMITMENTS*

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)				(in %)
High-Tech Start-up Fund		1		42		-98
ERP Venture Capital Fund Investments		246		187		32
Future Fund KfW Capital		225		389		-42
of which ERP/Zukunftsfonds Growth Facility		181		245		-26
of which Wachstumsfonds Deutschland I		0		144		-100
of which Green Transition Facility		44		0		>100
Future Fund Federal Republic		1,657		642		>100
of which GFF EIF Growth Facility		594		474		25
of which Deep Tech Climate Fonds		215		0		>100
of which Wachstumsfonds Deutschland I		48		168		-71
of which European Tech Champions Initiative (ETCI)		800		0		>100
Total commitments (1)		2,129		1,259		69

* Amounts in the table may not add up due to rounding differences.

(1) Commitments represent the volume of funds committed for loans and other business transactions in the relevant year, including amounts to be disbursed in future years, and do not include amounts disbursed in the relevant year pursuant to commitments made in prior years.

Export and Project Finance (KfW IPEX-Bank)

Corporate Background

KfW IPEX-Bank conducts export and project finance activities which the European Commission deemed to fall outside the scope of KfW’s promotional activities directly and on its own behalf, while it conducts the promotional export and project finance activities in its own name on behalf of KfW on a trust basis. KfW provides funding for KfW IPEX-Bank at market rates based on the ratings assigned to KfW IPEX-Bank by international rating agencies. As of January 1, 2008, and in accordance with the understanding reached between the European Commission and the Federal Republic, KfW IPEX-Bank commenced operations as a legally independent entity wholly-owned by KfW. For more information, see “General—Relationship with the Federal Republic—Understanding with the European Commission.”

Total assets of KfW IPEX-Bank (IFRS, before consolidation) amounted to EUR 32.8 billion as of December 31, 2023 (December 31, 2022: EUR 27.6 billion). Total outstanding loans and guarantees (including promotional activities) for KfW’s business sector Export and Project Finance amounted to EUR 59.4 billion as of December 31, 2023 (December 31, 2022: EUR 54.9 billion). KfW IPEX-Bank is headquartered in Frankfurt am Main, Germany, and maintains a branch office in London, United Kingdom, a subsidiary in Singapore and representative offices in eight locations outside Germany. As of December 31, 2023, KfW IPEX-Bank employed 932 persons, excluding managing directors but including temporary personnel (December 31, 2022: 899).

In 2022, KfW IPEX-Bank Asia Ltd, a wholly-owned subsidiary of KfW IPEX-Bank, commenced its business activities in Singapore with a share capital of SGD 16.5 million under a merchant bank licence issued by the Monetary Authority of Singapore (MAS). IPEX Asia Ltd. is fully consolidated under the existing profit transfer agreement between KfW IPEX-Bank and KfW Beteiligungsholding GmbH, a wholly-owned subsidiary of KfW, described below.

In accordance with the understanding with the European Commission, KfW IPEX-Bank has obtained a banking license and is subject to the KWG and the corporate tax regime. KfW IPEX-Bank is approved as an IRBA (internal ratings-based approach) bank under the Basel II rules by the relevant German supervisory authorities – BaFin and the Deutsche Bundesbank. With respect to the SSM, KfW IPEX-Bank to date does not qualify as a significant credit institution and is therefore not directly supervised by the ECB, but rather continues to be supervised by BaFin in cooperation with Deutsche Bundesbank. Given the fact that as of December 31, 2023, KfW IPEX-Bank’s total assets (IFRS, before consolidation) amounted to EUR 32.8 billion, KfW IPEX- Bank may be qualified as a significant credit institution in the near future, which could lead to direct supervision by the ECB from as early as 2025 onwards. For additional information on KfW IPEX-Bank and the SSM, see “KfW—General—Supervision and Regulation—Regulation—Supervisory Structure and Enforcement Powers.” For more information on the SSM, see “Federal Republic of Germany—Monetary and Financial System—Financial System—European Financial System—European System of Financial Supervision and European Banking Union.”

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KfW IPEX-Bank (controlled company; including its fully consolidated subsidiary IPEX Asia Ltd.) signed a profit transfer agreement with KfW Beteiligungsholding GmbH (controlling company) in order to form a corporate income tax (CIT) fiscal unity. Under this profit transfer agreement, KfW IPEX-Bank is required to transfer its entire annual profit under applicable German commercial law to KfW Beteiligungsholding GmbH effective from the end of the fiscal year ended December 31, 2016.

Business

KfW IPEX-Bank focuses on supporting the internationalization and the competitiveness of internationally active German and European companies and offers project, export and trade financing. It provides medium and long-term investment and export financing in the form of amortizing loans, guarantees or leasing financing as well as project, object and acquisition financing. KfW IPEX-Bank also offers derivative instruments to allow its clients to hedge interest and currency risk and instruments for short-term trade financing, such as participations in letters of credit.

With the consent of the Federal Government, KfW delegated the mandate of the management of the Shipping CIRR Program and the ERP (European Recovery Program) Export Financing Program to KfW IPEX-Bank. Both programs are executed by KfW IPEX-Bank, applying strict ethical walls. The programs offer fixed interest rate loans to buyers based on the CIRR (Commercial Interest Reference Rate), which is a minimum interest rate prescribed by the OECD for officially supported financings in order to ensure competitive neutrality. The Shipping CIRR Program is open to banks financing ships built in German shipyards and offers a refinancing option through KfW. The ERP Export Financing Program supports lending for German exports to emerging and developing countries combined with fixed refinancing through KfW. These loans are supported through the ERP. In the past, lending of CIRR based loans in the ERP Program was provided through KfW IPEX-Bank and via AKA Ausfuhrkredit-Gesellschaft mit beschränkter Haftung, both as lenders of record. Since January 2017, all banks eligible for buyer credit cover (Hermes cover) may directly apply to the ERP Export Financing Program.

KfW, on behalf of the Federal Ministry for Economic Affairs and Energy (now named Federal Ministry for Economic Affairs and Climate Action), has launched the Africa CIRR export financing program (“Africa CIRR”). The program aims to strengthen economic cooperation with Africa. Specifically, Africa CIRR is designed to support loans to finance large-volume German exports and to promote the economy in African buyer countries. All credit institutions eligible to apply for buyer credit cover from the Federal Republic (so-called Hermes cover) are eligible for the Africa CIRR. The Federal Republic mandated KfW and KfW designated KfW IPEX-Bank to administer the program.

KfW IPEX-Bank’s principal customers are German and European companies (and their customers) with international operations and larger medium-sized companies in basic and manufacturing industries as well as in the retail, health, telecommunications, power/renewables, water, shipping, aviation, rail, transport and social infrastructure sectors. In 2022, the KfW IPEX-Bank Management Board together with KfW, its sole shareholder, decided to implement an oganizational repositioning within its business model. Following the technical implementation of this decision, the seven sectors in place until December 31, 2023, have been grouped into four future-oriented sectors: (1) the energy sector aiming at the transformation of the energy industry, primarily via wind power, solar energy and hydrogen, as well as water and waste management infrastructure; (2) the mobility sector striving for the transformation of the maritime and aviation industries, as well as climate-friendly mobility and transport; (3) the infrastructure sector supporting the roll-out of digital infrastructure, charging infrastructure, grid-based energy infrastructure, air and sea ports, as well as the construction industry, among others; and (4) the industry & commerce sector for metal and mining, commodity trading, financial institutions, and the automotive industry and retail, among others. In addition, KfW IPEX-Bank will continue to provide structured financing for exports and infrastructure, as well as financing for global climate change mitigation and raw materials supplies in Europe. The sectoral repositioning described above took effect as of January 1, 2024, and KfW IPEX-Bank’s commitments will be reported accordingly beginning with the first quarter of 2024.

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Traditionally, the bulk of loans extended by KfW IPEX-Bank has been used for export and project financing to buyers of German or European exports. In recent years, KfW IPEX-Bank has increasingly extended loans to finance direct investments by German enterprises and other corporate purposes linked to the internationalization of German companies. In addition, KfW IPEX-Bank co-finances large-scale infrastructure projects and means of transport (e.g., airplanes and vessels) in the German and European transport sector. KfW IPEX-Bank also provides, as part of its core business, financing for environment and climate protection projects. Finally, KfW IPEX-Bank’s loans are also used to secure sources of raw materials for the German and European industry.

KfW IPEX-Bank’s loans are generally extended directly to the ultimate borrower, and KfW IPEX-Bank grants a significant portion of these loans at its own risk. KfW IPEX-Bank regularly cooperates with other financial institutions by way of consortia and syndications. In some cases, KfW IPEX-Bank may arrange for commercial banks to assume the risk on portions of loans made by KfW IPEX-Bank through risk-participations, for which KfW IPEX-Bank pays a fee to the bank assuming the risk. KfW IPEX-Bank is eligible to act as on-lending bank under certain of KfW’s promotional programs. In 2023, KfW IPEX-Bank refinanced loan commitments for export and project finance under KfW’s promotional programs in an amount of EUR 1.3 billion (2022: EUR 241 million).

From time to time, KfW IPEX-Bank also enters into framework loan agreements with non-German banks, which enable such banks to extend loans to their customers for the purpose of importing equipment from German or other European exporters. Because the amounts of individual loans are usually small, the related transaction costs are relatively high. The framework agreements help to reduce these transaction costs.

Loans extended by KfW IPEX-Bank are usually secured by collateral and often benefit from a payment guarantee or other security arrangement. Loans extended to finance direct investments may benefit from an investment guarantee against political risk by the Federal Republic if the host country risk is assessed to be substantial.

A portion of export finance loans extended by KfW IPEX-Bank is guaranteed by the Federal Republic through HERMES, the official German export credit insurer. HERMES insurance covers up to 95% – in some instances even up to 100% – of KfW IPEX-Bank’s export and project finance business risk, so that the risk of the portion covered is the equivalent of the Federal Government’s risk. HERMES also provides coverage for related deliveries from other, mainly European, countries provided that they do not exceed a certain portion of the total delivery for which an export finance loan was extended. Furthermore, KfW IPEX-Bank’s financing frequently benefits from a guarantee by a foreign export credit agency or a government instrumentality in the buyer’s country.

For borrowers in other European and OECD countries where the country risk is not considered high, KfW IPEX-Bank has been increasingly extending loans on the basis of ordinary banking collateral (e.g., mortgages on aircraft or ships) without seeking the benefit of HERMES or similar coverage. In addition, even when HERMES coverage is sought, KfW IPEX-Bank often extends loans on which the insured portion is less than 95%. As of December 31, 2023, outstanding loans and guarantees (including promotional activities) outside Germany for KfW’s business sector Export and Project Finance amounted to EUR 44.8 billion, of which EUR 8.0 billion, or 18%, were export finance loans which are fully or partly guaranteed by HERMES.

Commitments

The following table shows commitments in KfW’s business sector Export and Project Finance for each of the years indicated:

EXPORTAND PROJECT FINANCE COMMITMENTS

	Year ended December 31,								Year-to-Year
	2023				2022				% change
	(EUR in millions)		(in % of total)		(EUR in millions)		(in % of total)		(in %)
Commercial business		17,470		72		12,369		68		41
Promotional business (conducted on behalf of KfW)		6,683		28		5,751		32		16
Total commitments (1)		24,152		100		18,120		100		33

(1) Commitments represent the volume of funds committed for loans and other business transactions in the relevant year, including amounts to be disbursed in future years, and do not include amounts disbursed in the relevant year pursuant to commitments made in prior years.

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In 2023, total commitments of the Export and Project Finance business sector increased to EUR 24.2 billion from EUR 18.1 billion in 2022, including commitments under the CIRR scheme for bank refinancing, which is supported by the federal budget. With the consent of the Federal Government, KfW has delegated the mandate for the CIRR scheme for bank refinancing to KfW IPEX-Bank.

The increase in total commitments in 2023 compared to 2022 was driven by higher commitments in almost every sector except for Financial institutions, trade and commodity finance and Infrastructure.

Commitments by Sector

The following table shows KfW IPEX-Bank’s commitments by sector for each of the years indicated:

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)				(in %)
Industries and services		4,496		2,914		54
Power, renewables and water		5,759		2,821		104
Aviation, mobility, and transport		2,995		2,633		14
Financial institutions, trade and commodity finance		1,879		2,458		-24
Basic industries		3,072		2,420		27
Maritime industries		3,730		2,152		73
Infrastructure		1,369		2,105		-35
CIRR scheme for bank refinancing (Ship + Africa + ERP finance) (1)		851		616		38
Total commitments		24,152		18,120		33

(1) Starting in 2021 the CIRR scheme for bank refinancing includes commitments in an amount of EUR 100 million under the Africa CIRR scheme designed to support German exports to Africa and to promote the economy in African buyer countries.

Despite continuous challenging market conditions, commitments in export and project finance increased in 2023 compared to 2022, due to, among others, higher demand for financing for on- and off-shore windparks, the expansion of fiber optic connections and battery cell production. Commitments (excluding those under the CIRR scheme for bank refinancing) amounted to EUR 23.3 billion in 2023 (2022: EUR 17.5 billion). The highest commitment volumes were achieved in the sectors Power, renewables and water with EUR 5.8 billion (2022: EUR 2.8 billion), Industries and services with EUR 4.5 billion (2022: EUR 2.9 billion), followed by Maritime industries with EUR 3.7 billion (2022: EUR 2.2 billion) and Basic Industries with EUR 3.1 billion (2022: EUR 2.4 billion). For a description of the re-grouping of KfW IPEX-Bank’s sectors with effect from January 1, 2024, see “—Business” above.

Commitments under the CIRR scheme for bank refinancing increased slightly in 2023 to EUR 0.9 billion (2022: EUR 0.6 billion).

Commitments by Geographic Area

In 2023, KfW IPEX-Bank’s commitments were reported for the following three regions: (1) Germany; (2) Europe (excluding Germany, but including Russia and Turkey); and (3) the rest of the world. In 2023, KfW IPEX-Bank’s commitments for project and export financing (excluding the CIRR scheme for bank refinancing) within Germany increased to EUR 6.0 billion from EUR 4.7 billion in 2022. In 2023, commitments in Europe (excluding Germany, but including Russia and Turkey) increased to EUR 8.9 billion from EUR 8.0 billion in 2022. KfW IPEX-Bank’s commitments in the rest of the world increased to EUR 8.4 billion in 2023 compared to commitments of EUR 4.9 billion in 2022. Commitments under the CIRR scheme for bank refinancing (2023: EUR 0.9 billion; 2022: EUR 0.6 billion) are trans-regional.

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Commitments by Product

The following table shows KfW IPEX-Bank’s commitments by product for each of the years indicated:

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)				(in %)
Corporate transactions (for German or European export companies)		16,090		12,611		28
Thereof
Loans (term loans and bullet)		10,492		7,114		47
Trade finance		1,270		1,674		-24
Revolving credit facilities for cash drawings		2,480		2,136		16
Guarantees		1,557		1,636		-5
Lease finance		290		50		>100
Project finance (1)		6,575		4,534		45
Acquisition finance (1)		396		203		95
Asset finance (1)		139		157		-11
Loans to funds		101		0		100
CIRR scheme for bank refinancing (ship + ERP + Africa)		851		616		38
Total commitments		24,152		18,120		33

(1) The product categories project finance, asset finance and acquisition finance may also include loans, guarantees, lease finance or revolving credit facilities that are not attributed to any sub-category under the corporate transactions product category.

Funding

The funds for KfW IPEX-Bank’s commitments are mainly provided by KfW through borrowings in the capital markets. KfW provides funding to KfW IPEX-Bank’s international project and export finance business at market rates based on the ratings assigned to KfW IPEX-Bank by international rating agencies. For those areas of export finance which the European Commission has deemed to fall within the scope of the promotional activities of KfW, funds from the ERP Special Fund may also be used to subsidize interest rates. In 2023, EUR 18 million of loan disbursements were supported by the ERP Special Fund (2022: EUR 33 million).

The terms of export and project finance loans funded in the capital markets are based on the cost of funds to KfW, plus a margin intended to cover the administrative cost of the loan, the credit risk and a return on capital. Because the Federal Republic is a member of the OECD, loans financed with funds from the ERP Special Fund or under the CIRR scheme for the shipping industry are required to comply with OECD regulations, which provide for minimum interest rates and maximum credit periods. Margins on these loans are generally intended to cover all the risks of such loans as well as administrative costs and a return on capital. In addition, KfW IPEX-Bank charges customary banking fees for reserving and providing financing and for processing. Loans denominated in currencies other than euros are hedged through matched funding or other mechanisms.

KfW Entwicklungsbank (KfW Development Bank)

Under the brand name KfW Entwicklungsbank, KfW acts as the Federal Republic’s international development bank, extending loans and disbursing grants mainly to foreign public sector borrowers and recipients. In 2023, approximately 41% of these loans and grants were refinanced from federal budget funds provided to KfW. All of KfW’s international development activities are made according to instructions from the Federal Government or, in the case of mandates, i.e., grants funded by governmental or supranational entities and distributed using KfW’s expertise and channels, from the respective donor. Mandates and all funds from the Federal Government involved in loan commitments and grants do not, by their nature, appear on KfW’s consolidated statement of financial position.

KfW extends financial cooperation (Finanzielle Zusammenarbeit, “FZ”) loans in three ways:

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• Traditional Financial Cooperation Loans (FZ-Standardkredite), extended for the account of the Federal Republic;

• Financial Cooperation Development Loans (FZ-Entwicklungskredite), in which KfW offers its own funds as an additional source of financing. For these loans, federal budget funds at low interest rates or grant funds are combined with funds from KfW that are refinanced in the capital markets. As of December 31, 2023, approximately 98% of outstanding commitments refinanced with KfW funds were guaranteed either by a special guarantee facility of the Federal Republic or by export credit agencies. Interest rates and related terms of Financial Cooperation Development Loans are significantly more favorable to the borrower than market terms and, therefore, meet the requirements for recognition as official development assistance (“ODA”); and

• Financial Cooperation Promotional Loans (FZ-Förderkredite), funded solely through funds raised by KfW in the capital markets. These loans may meet the requirements for recognition as ODA as they offer more favorable terms to the borrower than market terms. As of December 31, 2023, approximately 89% of outstanding Financial Cooperation Promotional Loans were guaranteed by a special guarantee facility of the Federal Republic.

Generally, interested foreign governments submit applications for financial cooperation to the Federal Government, which then asks KfW to appraise the proposed projects. In the case of Financial Cooperation Promotional Loans, project sponsors may submit their proposals directly to KfW. KfW maintains a staff of economists, engineers and other specialists to assist in the appraisal and development of projects. KfW receives fees from the Federal Republic for loans and grants extended for the account of the Federal Government and Financial Cooperation Development Loans, calculated as a percentage of outstanding loans and grants, as far as they are financed out of the federal budget. Based on KfW’s appraisal and its recommendation, the Federal Republic decides whether it will fund a particular project. Upon a favorable decision and upon determination of the terms and conditions of financing, KfW enters into a loan or grant agreement with the recipient country or, if applicable, the individual agency responsible for the project, in which case the obligations under that agreement would then usually be fully guaranteed by the respective recipient country.

Financial cooperation loans and grants are disbursed according to the progress of the relevant project, and KfW monitors the utilization of funds to ensure compliance with the provisions of the loan or grant agreement.

The following table shows KfW Entwicklungsbank’s commitments for each of the years indicated:

KFW ENTWICKLUNGSBANK COMMITMENTS

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)				(in %)
Loan commitments		5,290		6,109		-13
of which federal funds		372		825		-55
of which KfW’s funds refinanced in the capital markets		4,918		5,285		-7
Grant commitments		3,375		4,534		-26
Mandates		375		288		30
Total commitments		9,040		10,931		-17

Total commitments of KfW Entwicklungsbank decreased by 17% to EUR 9.0 billion in 2023 from EUR 10.9 billion in 2022. The relative share of loan commitments that were refinanced in the capital markets increased to 93% in 2023, from 86% in 2022.

In 2023, Asia accounted for 22% of KfW Entwicklungsbank’s commitments (2022: 28%); Sub-Saharan Africa accounted for 29% (2022: 24%); Middle East/North Africa accounted for 15% (2022: 16%); Europe/Caucasus accounted for 19% (2022: 14%); Latin America accounted for 13% (2022: 14%); and trans-regional commitments accounted for 3% (2021: 4%).

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The following table shows KfW Entwicklungsbank’s commitments by sector for each of the years indicated and as a percentage of its total commitments:

	Year ended December 31,								Year-to-Year
	2023				2022				% change
	(EUR in millions)		(in % of total)		(EUR in millions)		(in % of total)		(in %)
Economic infrastructure		3,738		41		3,531		32		+6
Social infrastructure		2,825		31		3,836		35		-26
Financial sector		832		9		1,182		11		-30
Production sector		303		3		840		8		-64
Others (1)		1,341		15		1,540		14		-13
Total commitments		9,040		100		10,931		100		-17

(1) Consists mainly of commitments made for multi-sector projects and emergency assistance in crisis situations.

DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH

DEG, a German limited liability company, is a legally independent entity founded in 1962. DEG is based in Cologne, Germany. In 2001, KfW acquired DEG from the Federal Republic. Since then, KfW has been DEG’s sole shareholder and DEG has been fully consolidated in KfW’s consolidated financial statements. As of December 31, 2023, DEG maintained 12 representative offices in developing countries or emerging economies. In 2023, DEG employed an average of 724 persons (2022: 704). As of December 31, 2023, DEG’s total assets (IFRS, before consolidation) amounted to EUR 8.3 billion (2022: EUR 7.8 billion).

DEG’s activities focus on corporates, project finance, financial institutions and funds investing in Africa, Asia, Latin America, and Central and Eastern Europe. DEG promotes private enterprise structures, thus contributing to sustainable economic growth, lasting improvement in the living conditions of the local population and the global Sustainable Development Goals. To this end, DEG provides long-term financing for private enterprises investing in developing countries. In addition, DEG offers customized consultancy services, for example, in the areas of environmental management, corporate governance, resource efficiency or training and skills.

DEG conducts its activities in accordance with the principles of subsidiarity, thus in cooperation with commercial banks rather than in competition with them. It does not provide subsidized financing, but instead offers financing solely on commercial terms and conditions (apart from smaller state support programs within the framework of the support for German companies in Africa). DEG also seeks to mobilize other partners in order to raise additional capital for its clients’ investments.

Serving public policy objectives of the Federal Government, DEG has been granted a favorable tax status under which only part of DEG’s activities are subject to CIT. DEG does not distribute profits but instead re-channels them into new investments.

DEG’s obligations do not benefit from the Guarantee of the Federal Republic or from Anstaltslast, and while DEG’s indebtedness is reflected in KfW’s consolidated statement of financial position, its debt represents obligations of DEG and not of KfW. KfW and DEG have a refinancing agreement in place, pursuant to which KfW acts as sole issuer in the capital markets and provides DEG with mid- and long-term capital market funds according to DEG’s capital needs. In addition, internal agreements have been reached concerning the respective fields of business activities, the mutual use of offices abroad, joint public relations activities and joint usage of several information technology services.

The following table shows DEG’s commitments for each of the years indicated:

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DEG COMMITMENTS

	Year ended December 31,				Year-to-Year
	2023		2022		% change
	(EUR in millions)				(in %)
Loans		1,277		1,172		9
Equity participations		476		387		23
Mezzanine financing		116		84		38
Total commitments		1,869		1,644		14

Financial Markets

KfW’s Financial Markets business sector comprises the group’s treasury activities, including its funding activities and its financial asset management. Furthermore, this business sector manages KfW’s asset-backed securities (“ABS”) as well as KfW’s green bond portfolio, which are all part of KfW’s promotional activities, as well as other capital markets-related activities currently consisting of privatization initiatives relating to Deutsche Telekom AG (“Deutsche Telekom”) and Deutsche Post AG (“Deutsche Post”).

Funding

KfW’s principal sources of funds are the international financial markets and public funds, with the majority of lending in its business sectors being financed from funds raised by KfW in the international financial markets. KfW Group’s consolidated balance sheet total assets at December 31, 2023 amounted to EUR 560.7 billion. EUR 507.4 billion, or 90.5% of this amount, was financed through borrowings (i.e., from financial market funds or public funds). In addition, as of December 31, 2023, KfW had EUR 21.3 billion in liabilities held in trust (for which the Federal Government mostly provides the funding and assumes all risks), which do not appear on KfW’s consolidated statement of financial position. In line with the focus on mid-term and long-term loans within its loan portfolio resulting from its promotional business, as of December 31, 2023, 81% of KfW’s consolidated total borrowings outstanding had remaining maturities of one year or more.

Financial-Market Funds

KfW raises short-term and long-term funds in the international financial markets through the issuance of bonds and notes (including commercial paper) and by incurring loans against debt certificates (Schuldscheindarlehen or “promissory note loans”). Long-term funding with initial maturities of more than one year (“capital-market funding”) represents the most important source of funding. Short-term borrowings with initial maturities of less than one year in the form of commercial paper (“money-market funding”) are primarily used for purposes of KfW’s liquidity management. As of December 31, 2023, the percentage of capital-market funding outstanding out of total financial-market funds outstanding was 92%.

All amounts stated in connection with KfW’s capital-market and money-market funding transactions or funding volume are, unless stated otherwise, based on net proceeds to KfW, which are calculated as principal amount less discount and underwriting commissions, if any.

Capital-Market Funding. KfW’s capital-market funding policy pursues a dual objective: to achieve the most favorable terms possible for funds raised in the capital markets; and to minimize, to the extent practicable, the effects of changes in interest rates and foreign exchange rates mainly through interest rate and currency risk hedging instruments and, to a more limited extent, by matching funding liabilities with loan assets. In order to achieve favorable terms for funds raised, KfW maintains an active presence in all major capital markets and utilizes a broad range of funding instruments in various currencies, covering a wide range of maturities.

KfW’s capital-market funding instruments comprise four categories of instruments: bonds issued under KfW’s benchmark programs (in euro or U.S. dollar, under KfW’s European medium-term note program or its SEC-registered debt shelf); bonds publicly placed outside the benchmark programs; bonds sold in “private placements,” a term KfW uses in the commercial sense to refer to sales to a specific investor or a limited number of investors; and “green bonds”, which comprise bonds from any of the first three categories, the proceeds of which are linked to investments financed by KfW currently in the project categories Renewable Energy, Green Buildings (formerly Energy Efficiency), Clean Transportation, Biodiversity and Climate Protection Programme for Corporates. In 2023, benchmark bonds accounted for a funding volume of EUR 57.9 billion, or 64%, of KfW’s total capital-market funding, while bonds placed publicly outside the benchmark programs accounted for EUR 14.3 billion, or 16%. The volume of bonds sold in private placements and of green bonds amounted to EUR 5.1 billion, or 6%, and EUR 12.9 billion, or 14%, respectively. Total capital-market funding in 2023 amounted to EUR 90.2 billion (2022: EUR 89.4 billion). With respect to refinancing its funding requirements resulting from the KfW Special Program and from its support of companies in the energy sector under special mandates by the Federal Government, KfW has had access to an additional source of financing through the WSF. Refinancing through the WSF in 2023 totaled EUR 6.9 billion (2022: EUR 31.6 billion), of which EUR 2.0 billion related to the KfW Special Program and EUR 4.9 billion related to the support of companies in the energy sector.

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KfW expects its volume of long-term funding to be raised in the capital markets in 2024 to be in a range of EUR 90 billion to EUR 95 billion, of which EUR 10 billion to EUR 13 billion are expected to be green bonds.

In 2023, KfW conducted five new bond issuances as well as 12 re-openings (17 transactions in total in 2023) in an aggregate principal amount of EUR 35 billion under its euro benchmark program. Also in 2023, KfW conducted six new bond issuances in an aggregate principal amount of USD 26 billion under its U.S. dollar benchmark program.

KFW’S BENCHMARK BOND ISSUANCES IN 2023

	Aggregate principal amount in billions		Maturity at issuance (in years)		Interest rate in % per annum
KfW U.S. $-Benchmark I/2023		USD 4.0		5		3.750
KfW U.S. $-Benchmark II/2023		USD 3.0		3		3.625
KfW U.S. $-Benchmark III/2023		USD 4.0		5		3.875
KfW U.S. $-Benchmark IV/2023		USD 4.0		10		4.125
KfW U.S. $-Benchmark V/2023		USD 5.0		3		4.625
KfW U.S. $-Benchmark VI/2023 (Dual Tranche)		USD 4.0		2		5.125
KfW U.S. $-Benchmark VI/2023 (Dual Tranche)		USD 2.0		7		4.750
KfW Euro-Benchmark I/2023		EUR 6.0		5		2.750
KfW Euro-Benchmark II/2023		EUR 5.0		7		3.125
KfW Euro-Benchmark III/2023		EUR 3.0		10		2.875
KfW Euro-Benchmark IV/2023		EUR 5.0		3		2.875
KfW Euro-Benchmark V/2023		EUR 4.0		5		3.125
KfW Euro-Benchmark I/2022 (re-opening)		EUR 1.0		10		0.125
KfW Euro-Benchmark V/2022 (re-opening)		EUR 1.0		5		1.250
KfW Euro-Benchmark VII/2022 (re-opening)		EUR 1.0		3		2.500
KfW Euro-Benchmark IV/2021 (re-opening)		EUR 1.0		7		0.000
KfW Euro-Benchmark III/2022 (re-opening)		EUR 1.0		3		0.125
KfW Euro-Benchmark I/2023 (re-opening)		EUR 1.0		5		2.750
KfW Euro-Benchmark V/2022 (re-opening)		EUR 1.0		5		1.250
KfW Euro-Benchmark I/2019 (re-opening)		EUR 1.0		10		0.750
KfW Euro-Benchmark V/2019 (re-opening)		EUR 1.0		7		0.000
KfW Euro-Benchmark III/2023 (re-opening)		EUR 1.0		10		2.875
KfW Euro-Benchmark II/2020 (re-opening)		EUR 1.0		7		0.000
KfW Euro-Benchmark V/2023 (re-opening)		EUR 1.0		5		3.125

In 2023, KfW’s total new capital-market funding was raised in 10 different currencies and 186 separate capital markets transactions. KfW’s core currencies are the euro and the U.S. dollar, which together accounted for 83% of KfW’s total new capital-market funding in 2023 (2022: 84%). The percentage of new funds raised in euros, which continues to be KfW’s most significant funding currency, decreased from 65% in 2022 to 54% in 2023, whereas the percentage of new funds raised in U.S. dollars increased from 19% to 29% over the same period. The percentage of new funds raised in pounds sterling remained stable at 9% in 2023, which made it KfW’s third most significant funding currency in 2023.

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KFW’S TOTAL NEW CAPITAL-MARKET FUNDING VOLUME 2023BY CURRENCIES *

	EUR in billions		In % of total
Euro (EUR)		48.9		54
U.S. dollar (USD)		25.8		29
Pound sterling (GBP)		8.2		9
Australian dollar (AUD)		3.7		4
Norwegian krone (NOK)		1.4		2
Other currencies (1)		2.1		2
Total		90.2		100

* Amounts in the table may not add up due to rounding differences.

(1) CAD, CNY, HKD, PLN and SEK.

In connection with its green bond issuances, KfW has a Green Bond Framework in place that reflects international best practices and is aligned with the 2021 edition of the “Green Bond Principles” (including June 2022 Appendix 1) supported by the International Capital Market Association (“ICMA”). In December 2023, KfW published an updated Green Bond Framework on its website, which is applicable to issuances of green bonds by KfW from January 1, 2024 onwards. Under the updated Green Bond Framework, the proceeds from such green bond issuances may be linked to promotional loan programs and to financing provided by KfW in the context of international cooperation and project and export finance in the eligible project categories Renewable Energy, Green Buildings (formerly Energy Efficiency), Clean Transportation, Biodiversity and Climate Protection Programme for Corporates. Through its green bond issuances, KfW aims to broaden its investor base by addressing socially responsible investors and to enhance the capital markets’ infrastructure for financing environmental projects that have the reduction of greenhouse gas emissions as their common objective. Net proceeds from the sale of its green bonds and requests for disbursements under the eligible environmental projects are tracked by KfW in an appropriate manner. KfW provides investors with information regarding the use of proceeds in terms of disbursements on a regular basis on its website. Unless otherwise indicated, information available on, or accessible through, KfW’s website is not incorporated herein by reference. In 2023, KfW conducted 15 new green bond issuances in 9 currencies as well as 7 re-openings. In total, green bonds accounted for a funding volume of EUR 12.9 billion, or 14%, of KfW’s total capital-market funding.

The most important sources of capital-market funding for KfW are bond and note issuances followed by promissory note loans. As of December 31, 2023, the amount of outstanding bonds and notes issued by KfW totaled EUR 414.6 billion, representing a EUR 28.7 billion increase from EUR 385.8 billion outstanding as of December 31, 2022.

Of outstanding borrowings, promissory note loans continue to be KfW’s second most important capital-market funding instrument, with a book value of EUR 40.2 billion as of December 31, 2023. Of this amount, EUR 39.1 billion was recognized as financial liabilities at amortized cost (of which EUR 1.1 billion as liabilities to banks and EUR 38.0 billion as liabilities to customers) and EUR 1.0 billion was recognized as financial liabilities at fair value (of which EUR 0.2 billion as liabilities to banks and EUR 0.8 billion as liabilities to customers). The decrease in the book value of promissory note loans from EUR 53.5 billion in 2022 to EUR 40.2 billion in 2023 is largely due to decreased refinancing via the WSF. Promissory note loans are a special instrument of the German capital markets, under which the lending entity (generally a bank, insurance company or public pension fund) receives a certificate evidencing its loan to the borrower and the terms of such loan. Maturities on promissory note loans range from one to 30 years, thereby providing a high degree of flexibility to both the borrower and the lender. Transferable only by way of assignment, promissory note loans have only limited liquidity in the interbank secondary market.

The following table sets forth summary information concerning KfW’s outstanding bonds and notes as well as promissory note loans with an initial maturity of more than one year and issued in the capital markets.

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INFORMATIONON ISSUANCESOF FUNDED DEBTOF KFW GROUP

(ASOF DECEMBER 31, 2023)

Currency	Number of  transactions		Interest type	Average interest rate in %  per annum  (1) (2)	Years of issue	Maturities	Average years to maturity (2)		Aggregate principal amount outstanding in applicable currency		Aggregate principal amount outstanding in EUR (3)
AUD		17	FIXED	3.55	2013-2023	2024-2032		2.23		19,200,000,000.00		11,805,939,863.49
CAD		6	FIXED	2.61	2005-2023	2025-2037		2.88		3,202,200,000.00		2,186,996,311.98
CHF		2	FIXED	2.55	2005-2007	2025-2037		3.85		1,305,000,000.00		1,409,287,257.02
CNY		16	FIXED	2.78	2021-2023	2024-2027		1.23		11,235,000,000.00		1,431,046,122.10
DKK		1	FIXED	0.00	2022	2024		0.88		1,000,000,000.00		134,175,958.35
EUR		414	FIXED	0.82	1999-2023	2024-2053		4.65		319,216,715,060.41		319,216,715,060.41
EUR		16	FLOATING	3.71	2004-2023	2024-2034		4.18		1,050,910,531.65		1,050,910,531.65
GBP		23	FIXED	2.57	2000-2023	2024-2037		2.85		29,106,803,000.00		33,492,667,855.70
GBP		1	FLOATING	6.22	2021	2024		0.45		500,000,000.00		575,340,889.48
HKD		3	FIXED	2.95	2021-2023	2024-2027		2.08		900,000,000.00		104,270,454.39
HUF		2	FIXED	10.32	2022	2024		0.59		85,000,000,000.00		222,048,066.88
JPY		7	FIXED	2.29	2004-2008	2024-2038		5.67		138,290,000,000.00		884,603,083.22
JPY		162	FLOATING	2.81	2002-2019	2024-2049		13.13		78,400,000,000.00		501,503,230.35
MXN		1	FIXED	4.40	2021	2025		1.57		1,000,000,000.00		53,409,958.82
NOK		16	FIXED	3.27	2004-2023	2024-2036		3.36		34,700,000,000.00		3,087,051,287.75
NZD		2	FIXED	2.13	2018-2021	2028		4.41		190,000,000.00		108,546,617.92
PLN		4	FIXED	2.98	2006-2022	2024-2025		0.65		1,605,668,840.50		370,012,407.07
SEK		9	FIXED	1.83	2011-2023	2024-2031		4.04		15,400,000,000.00		1,387,887,527.04
USD		62	FIXED	2.35	2002-2023	2024-2046		3.05		97,452,414,303.83		88,192,230,139.21
USD		2	FLOATING	4.76	2021-2023	2026		0.80		2,000,000,000.00		1,809,954,751.13
ZAR		16	FIXED	7.30	2020-2022	2028-2031		5.86		3,741,000,000.00		183,853,703.37
Total		782						4.11				468,208,451,077.33

(1) Interest rate of floating rate note means the applicable interest rate as of December 31, 2023. For floating rate notes with interest rates that are fixed in arrears, the latest fixed interest rate was used. Zero coupon bonds are included in the calculation with their average effective interest rates.

(2) Averages have been calculated on a capital-weighted basis taking into account the aggregate principal amount outstanding in euro.

(3) Conversion into euro at the spot rate using the ECB reference rates on December 31, 2023.

Money-Market Funding. KfW issues commercial paper under two commercial paper programs: the EUR 90 billion multicurrency commercial paper program and the USD 30 billion commercial paper program. As of December 31, 2023, KfW Group’s commercial paper outstanding totaled EUR 37.7 billion (December 31, 2022: EUR 39.1 billion).

Public Funds

As of December 31, 2023, the proportion of public funds in KfW Group’s borrowings was 9%. The most important source of public funds for KfW is the budget of the Federal Republic. Total long-term and short-term borrowings from funds provided by the federal budget (excluding loans on a trust basis) amounted to EUR 44.2 billion as of December 31, 2023 (December 31, 2022: EUR 61.0 billion). KfW Group’s long-term and short-term borrowings from the ERP Special Fund amounted to EUR 315 million as of December 31, 2023 (December 31, 2022: EUR 283 million). Public funds are made available to KfW Group for use in special categories of KfW’s domestic activities and certain export and project finance transactions with developing countries.

Public funds are particularly important in the area of financial cooperation, where KfW Entwicklungsbank extends loans and disburses grants to foreign public sector borrowers and recipients in developing countries and emerging economies. Federal budget funds constituted approximately 41% of the sources of funding for KfW Entwicklungsbank’s commitments in 2023. Funds from the Federal Government involved in loan commitments and grants of KfW Entwicklungsbank do not, by their nature, appear on KfW’s consolidated statement of financial position. For more information see “KfW Entwicklungsbank (KfW Development Bank).”

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Derivatives

KfW generally enters into derivatives transactions for hedging purposes in connection with its financing and funding activities. Accordingly, a substantial majority of its derivatives are interest- or currency-related derivatives. KfW Group does not enter into derivatives for trading purposes and does not facilitate the purchase of derivatives on behalf of any entities outside the group through brokerage or similar agency activities.

The following tables provide detailed information on the group’s derivatives exposures:

KFW GROUP’S DERIVATIVES EXPOSURE *

	Notional value				Fair value				Fair value
	As of December 31,				As of December 31, 2023				As of December 31, 2022
	2023		2022		Positive		Negative		Positive		Negative
	(EUR in millions)				(EUR in millions)				(EUR in millions)
Interest-related derivatives		662,522		621,417		3,861		7,417		4,478		9,268
Currency-related derivatives (1)		156,750		148,515		3,799		4,590		6,846		5,227
Credit derivatives as protection buyer		0		0		0		0		0		0
Miscellaneous		0		0		0		0		0		0
Total derivatives (2)(3)		819,271		769,932		7,660		12,007		11,324		14,496
Embedded derivatives accounted for separately		—		—		106		6		163		5
Total balance sheet items “derivatives designated for hedge accounting” and “financial assets/liabilities at FV - other derivatives”		819,271		769,932		7,766		12,013		11,487		14,501

* Amounts in the table may not add up due to rounding differences.

(1) Includes cross-currency swaps.

(2) Includes derivative financial instruments which are offered by KfW’s wholly-owned subsidiary KfW IPEX-Bank to its customers as hedging instruments in connection with, and related to, financing in the context of its export and project financing activities. In order to hedge the risk arising from these derivative transactions, KfW IPEX-Bank enters into hedging transactions with KfW. In the context of centralizing and aggregating market-facing hedging activities within the group at the parent level, KfW, in turn, hedges itself with corresponding offsetting transactions in the market to the extent necessary. These risk-mitigating hedging transactions entered into by KfW are also disclosed.

(3) Includes derivative contracts in closed risk positions entered into in connection with special mandates by the Federal Government in accordance with article 2 paragraph 4 of the KfW Law.

	As of December 31,
	2023		2022
	(EUR in millions)
Total positive fair value before netting		7,660		11,324
Total positive fair value after netting (1)		6,598		10,129
Collateral received		6,359		10,096
of which cash collateral		6,359		10,096
Total positive fair value after netting and collaterals		239		33

(1) Presents the effects of netting agreements that do not fulfill the offsetting criteria under IFRS. Due to the strict criteria for offsetting financial instruments under IAS 32, KfW Group’s consolidated statement of financial position does not reflect any netting effects with respect to its derivatives.

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KfW Group’s derivatives activities are reflected in its consolidated statement of financial position in the line items “Financial assets at fair value”, “Financial liabilities at fair value” and “Derivatives designated for hedge accounting.” For additional information on KfW Group’s derivatives exposure, see notes 8, 9, 39, 40, 49, 50, 57, 58 and 59 to the financial statements included in Exhibit (e) to this annual report. For more information on interest and currency risks related to derivatives as well as counterparty default risks, see “Combined management report—Risk report—Types of risk—Credit risk” and “—Market price risk,” respectively, included in Exhibit (e) to this annual report.

Asset Management

As of December 31, 2023, KfW Group held securities and investments in an amount of EUR 40.6 billion (December 31, 2022: EUR 38.1 billion). See “Combined management report—Economic report—Development of net assets of KfW Group” included in Exhibit (e) to this annual report for more information concerning securities and investments. EUR 34.1 billion, or 84%, of all securities and investments were held in the form of fixed-income securities for liquidity purposes in KfW’s liquidity portfolio. The remaining securities and investments were securities held as a surrogate for loans or as equity investments in the context of KfW Group’s promotional business (e.g., KfW’s ABS portfolio or DEG’s direct investments). Equity participations held directly or indirectly by KfW made up only a very limited amount of KfW Group’s securities and investments.

Liquidity Portfolio

KfW pursues a conservative liquidity management strategy. For this purpose, KfW holds financial assets in its liquidity portfolio in an amount of EUR 34.1 billion as of December 31, 2023 (December 31, 2022: EUR 32.9 billion). The bulk of securities held in this portfolio is denominated in euro. KfW purchases medium-term securities issued by banks, primarily covered bonds (Pfandbriefe), bonds of public sector issuers and supranational institutions or agencies as well as ABS and ABCP investments. The bulk of euro-denominated bonds included in KfW’s liquidity portfolio is eligible as collateral with the ECB and enables KfW to enter into repurchase agreements in refinancing operations within the European System of Central Banks via the Deutsche Bundesbank. For financial reporting purposes, securities denominated in U.S. dollar or GBP were converted into euro at the currency exchange rate as of December 31, 2023. In addition to these securities, as of December 31, 2023, KfW held money-market assets (overnight and term loans as well as reverse repurchase transactions) for liquidity management purposes in an amount of EUR 20.7 billion (December 31, 2022: EUR 5.2 billion).

As a signatory to the United Nations-supported “Principles for Responsible Investment” (PRI), KfW is committed to managing its liquidity portfolio in a sustainable manner. For KfW, this means integrating ESG criteria in its investment approach. In 2023, the integration of ESG criteria was based on a best-in-class approach that stipulated that for its liquidity portfolio, based on sustainability ratings from an external provider, KfW would only invest in bonds of issuers whose sustainability rating was among the best 50% of the respective sector. Sovereign bonds were eligible for such investments, provided that the relevant issuing country had reached “prime” status regarding its sustainability rating. In the context of its strategic tranSForm project, KfW has strengthened its ESG risk management and introduced a tool referred to as the “ESG risk profile” to consider and evaluate ESG risks in a structured manner and take them into account in the internal rating process. Against this background, from 2024 onwards, KfW has ceased applying the best-in-class approach for purposes of integrating ESG criteria in its investment decisions, but rather has been using its ESG risk profile tool.

In addition, KfW uses exclusion criteria for its liquidity portfolio that are based on the the exclusion list of KfW Group. KfW also engages in regular dialogues with issuers on sustainability matters.

ABS Portfolio

As of December 31, 2023, the promotional ABS portfolio volume amounted to EUR 17 million (December 31, 2022: EUR 129 million). KfW’s capital markets-based promotional activities for SMEs ended as of December 31, 2019. The remaining outstanding portfolio volume will decrease gradually with amortizations.

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Green Bond Portfolio

Under its green bond portfolio, KfW seeks to support climate and environmental protection by investing in green bonds of public sector issuers, supranational institutions and agencies, and banks as well as in green covered bonds and ABS. All of KfW’s green bond investments are aligned with the ICMA “Green Bond Principles.” In 2023, KfW provided EUR 480 million (2022: EUR 415 million) as part of its promotional activities for financing climate and environmental protection measures by investing in green bonds. As of December 31, 2023, the volume of the green bond portfolio amounted to EUR 2.4 billion. KfW’s green bond portfolio was launched in 2015 under a mandate of the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (now named Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection), which was last amended in 2021. After the agreed targets were reached, the ministry and KfW agreed to terminate the mandate, which expired at the end of December 2023. Existing bonds will be held to maturity.

Privatization Initiatives

The Federal Government mandated KfW to take measures with respect to the privatization of Deutsche Telekom and Deutsche Post. Pursuant to a special mandate by the Federal Government and in accordance with article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft), KfW has acquired and sold shares of both Deutsche Telekom and Deutsche Post in various transactions since 1997. In furtherance of the privatization initiatives of the Federal Government, KfW sold those shares through German and international public offerings, private placements, block trades, exchangeable bonds and other transactions. Pursuant to an arms-length agreement with the Federal Government, KfW is protected against the market risk of these transactions. The agreement provides that KfW will receive a percentage of any market value increase in the shares acquired and sold, plus a fee for its services.

As of December 31, 2023, KfW’s total ownership interest in Deutsche Telekom remained unchanged compared to December 31, 2022 with approximately 829.2 million ordinary shares. This represented a stake of approximately 16.6% in Deutsche Telekom (December 31, 2022: 16.6%).

As of December 31, 2023, KfW’s total ownership interest in Deutsche Post remained unchanged compared to December 31, 2022 with approximately 253.9 million ordinary shares. This represented a stake of approximately 20.5% in Deutsche Post (December 31, 2022: 20.5%). On February 9, 2024, KfW sold 50 million shares of Deutsche Post AG on the basis of an accelerated bookbuild offering to institutional investors. As a result, KfW’s stake in Deutsche Post AG decreased from approximately 20.5% to approximately 16.5%.

Given the agreement with the Federal Government described above, KfW’s holdings in shares of Deutsche Post and Deutsche Telekom are presented on KfW’s consolidated statement of financial position as Financial Assets at Fair Value, which are classified as “Loans and advances to customers – FVM.”

Loan Facility to Greece Mandated by the Federal Government

KfW supports the Federal Republic in conducting EU-wide financial support measures for Greece. In 2010, the Federal Government mandated KfW in accordance with article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft) to participate in a loan facility to Greece on behalf of the Federal Republic. All risks resulting from this loan facility are covered by a guarantee of the Federal Republic. As of December 31, 2023, the total amount outstanding of this loan to Greece amounted to EUR 11.4 billion (December 31, 2022: EUR 12.9 billion).

Strategic Shareholdings

KfW manages a number of direct and indirect strategic shareholdings, which include wholly-owned subsidiaries as well as shareholdings in other companies taken in the ordinary course of KfW’s business as well as a number of investments made in companies pursuant to special mandates (Zuweisungsgeschäfte) by the Federal Government in accordance with article 2 paragraph 4 of the KfW Law.

KfW’s Subsidiaries and Other Shareholdings

KfW’s most important strategic shareholdings are DEG (100%) and KfW Capital (100%), which are both directly held by KfW, as well as KfW IPEX-Bank GmbH (100%), which is held indirectly via KfW’s wholly-owned subsidiary KfW Beteiligungsholding GmbH. For a description of these entities and their operations, see “KfW Capital”, “Export and Project Finance (KfW IPEX-Bank)” and “DEG – Deutsche Investitions-  und Entwicklungsgesellschaft mbH” above.

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Furthermore, KfW directly holds stakes in Finanzierungs- und Beratungsgesellschaft mbH (100%), tbg Technologie-Beteiligungs-Gesellschaft mbH (100%), Berliner Energieagentur GmbH (25%), Elia Group (0.25%) True Sale International GmbH (7.7%) and the European Investment Fund (2.3%). In June 2019, KfW participated in a capital increase of Elia System Operator SA/NV and acquired a 0.25% stake in the company at its own risk. Elia System Operator SA/NV was renamed Elia Group SA/NV in 2023 and is the 100% holding company of Eurogrid International NV/SA which holds 80% of Eurogrid GmbH. For information on KfW’s 20% shareholding in Eurogrid GmbH, see “— KfW’s Shareholdings Pursuant to Special Mandates of the Federal Government — 50Hertz Transmission GmbH”.

KfW’s Shareholdings Pursuant to Special Mandates of the Federal Government

KfW’s investments in Airbus SE, 50Herz Transmission GmbH, CureVac N.V., HENSOLDT AG (“Hensoldt”), TransnetBW GmbH and German LNG Terminal GmbH, as well as KfW’s investments in Deutsche Telekom and Deutsche Post (see “Financial Markets—Privatization Initiatives”), were made pursuant to a special mandate by the Federal Government in accordance with article 2 paragraph 4 of the KfW Law, which authorizes the Federal Government to direct KfW to take measures in connection with matters in which the Federal Republic has an interest (Zuweisungsgeschäft). These investments were made at the Federal Republic’s economic risk and the opportunities and risks of these investments lie with the Federal Republic.

The stakes in CureVac N.V. (13.3%), HENSOLDT AG (25.1%) and German LNG Terminal GmbH (50.0%) are held directly by KfW. KfW’s shareholding in Airbus SE (9.1%) is held indirectly via various entities. KfW’s shareholding in 50Herz Transmission GmbH (20.0%) is held indirectly via a subsidiary of KfW (Selent Netzbetreiber GmbH), and KfW’s shareholding TransnetBW GmbH (24.95%) is also held via a subsidiary of KfW (Expand Netzbetreiber GmbH).

Airbus SE

In 2007, KfW, together with 14 other investors, agreed to jointly acquire from DaimlerChrysler group (now Mercedes-Benz Group) a stake of, at that time, 7.5% in European Aeronautic Defence and Space Company N.V. (“EADS”), the economic interest of which was held through the special purpose vehicle Dedalus GmbH & Co. KGaA (“Dedalus”). In connection with a further reduction by the Daimler group (now Mercedes-Benz Group) of its stake in EADS in December 2012, the Federal Government, which regards the ownership structure of EADS as a matter of strategic national interest, agreed on a revised government shareholding agreement with EADS, France and Spain, which allows the Federal Government to directly or indirectly own an equity stake of up to 12% in EADS. In this context, the Federal Government mandated KfW to directly or indirectly acquire and hold an equity stake of up to 12% in EADS on behalf of the Federal Republic.

At the beginning of April 2013, France, Germany and Spain entered into a supplemental shareholders’ agreement, which provided for the dissolution of the Dedalus consortium and for KfW and the remaining investors to hold their respective equity stakes in EADS directly and indirectly through Gesellschaft zur Beteiligungsverwaltung GZBV mbH & Co. KG (“GZBV”). At the end of 2013, GZBV increased its equity stake in EADS by buying approximately 1.87 million shares. In 2015, EADS transformed its legal form into a European company (Societas Europaea) and changed its legal name to Airbus Group SE. In April 2017, following approval by the annual general meeting, the legal name was changed into Airbus SE. As of December 31, 2023, KfW held, through GZBV, an equity stake of approximately 9.1% in Airbus SE. Together with the other investors’ interests in GZBV, GZBV held a total equity stake of 10.84% in Airbus SE.

50Hertz Transmission GmbH

In July 2018, the Federal Government mandated KfW pursuant to and in accordance with article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft), to acquire a 20% shareholding in Eurogrid International CVBA/SCRL (“Eurogrid International”, now Eurogrid International SA/NV). The transaction closed in August 2018. Under the mandate, all economic risks resulting from KfW’s investment are covered by a guarantee of the Federal Republic. At the time of the acquisition, Eurogrid International indirectly held all shares in the German transmission systems operator 50Hertz Transmission GmbH via its wholly-owned subsidiary Eurogrid GmbH.

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In June 2019, KfW swapped its 20% equity stake in Eurogrid International for a 20% equity stake in Eurogrid GmbH in accordance with its mandate by the Federal Government. This share swap was executed to simplify the holding structure. KfW’s stake in Eurogrid GmbH is now held via Selent Netzbetreiber GmbH, a wholly-owned subsidiary of KfW. The German transmission system operator 50Hertz Transmission GmbH is a wholly-owned subsidiary of Eurogrid GmbH, incorporated in Berlin, Germany.

In July 2022, the Federal Government mandated KfW, pursuant to and in accordance with the original mandate of July 2018 and article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft), to contribute an amount of EUR 50 million via KfW’s wholly-owned subsidiary Selent Netzbetreiber GmbH into the capital reserves of Eurogrid GmbH. The amount was provided to Eurogrid GmbH on August 5, 2022.

In July 2023, the Federal Government mandated KfW, pursuant to and in accordance with the original mandate of July 2018 and article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft), to contribute an amount of EUR 24 million via KfW’s wholly-owned subsidiary Selent Netzbetreiber GmbH into the capital reserves of Eurogrid GmbH. This amount was provided to Eurogrid GmbH on August 9, 2023.

CureVac N.V.

In June 2020, the Federal Government mandated KfW pursuant to and in accordance with article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft) to make an investment of approximately EUR 300 million through the acquisition of a stake in biopharmaceutical company CureVac AG (“CureVac”). CureVac is a German stock corporation under German law with its registered seat in Tübingen, Germany, which focuses on the research and development of medicines based on messenger ribonucleic acids (mRNA). The investment occurred at the end of July 2020. In August 2020, CureVac B.V., a private company with limited liability under Dutch law, offered and sold in an underwritten initial public offering (the “CureVac IPO”) new common shares, which were listed on the Nasdaq Global Market. In connection with the consummation of the CureVac IPO, all shares of CureVac AG were contributed into CureVac B.V. in exchange for shares of CureVac B.V., and CureVac B.V. was converted to a public company under Dutch law and accordingly renamed CureVac N.V. As a consequence, KfW’s investment is in shares of CureVac N.V.

HENSOLDT AG

In March 2021, the Federal Government mandated KfW pursuant to and in accordance with article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft) to acquire 25.1% of the outstanding shares in Hensoldt. Hensoldt is a stock corporation under German law with its registered seat in Taufkirchen, Germany, which focuses on electronic sensor solutions and optronics. The acquisition was completed in May 2021. In December 2023, the Federal Government mandated KfW, pursuant to and in accordance with the original special mandate of March 2021 and article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft), to acquire new shares in Hensoldt’s capital increase announced on December 7, 2023, pro-rata to their 25.1% shareholding.

TransnetBW GmbH

In November 2023, the Federal Government mandated KfW pursuant to and in accordance with article 2 paragraph 4 of the KfW Law (Zuweisungsgeschäft) to acquire a 24.95% stake in TransnetBW GmbH held by EnBW Übertragungsnetz Immobilien GmbH & Co. KG (“UENI”). At the time of the acquisition, UENI directly held all shares in the German transmission systems operator TransnetBW GmbH. KfW’s stake in TransnetBW GmbH is held via Expand Netzbetreiber GmbH, a wholly-owned subsidiary of KfW.

German LNG Terminal GmbH

In August 2022, the Federal Government mandated KfW to acquire a 50.0% equity participation in German LNG Terminal GmbH (“GLNG”) and to provide subsequent pro rata payments to the capital reserve of GLNG. To this end, KfW has entered into a share purchase agreement and a shareholders’ agreement with Gasunie LNG Holding B.V. and GBV Zweiunddreißigste Gesellschaft für Beteiligungsverwaltung mbH, a wholly owned subsidiary of RWE AG, regarding the equity participation and subsequent pro rata payments to the capital reserve. GLNG is a project company that is developing a liquefied natural gas (LNG) import facility in Brunsbüttel, Germany. The closing of the transaction took place in July 2023.

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CAPITALIZATION

CAPITALIZATIONOF KFW GROUPASOF DECEMBER 31, 2023

	(EUR in millions)
Borrowings
Short-term funds		40,773
Bonds and other fixed-income securities		414,553
Other borrowings (1)		52,025
Total borrowings		507,352
Equity
Paid-in subscribed capital (2)		3,300
Capital reserve		8,447
Reserve from the ERP Special Fund		1,191
Retained earnings		25,150
Fund for general banking risks		0
Revaluation reserve		-15
Total equity		38,073
Total capitalization		545,425

(1) Includes long-term and short-term borrowings from the ERP Special Fund of EUR 315 million.

(2) KfW’s equity capital, 80% of which is held by the Federal Republic and the remaining 20% by the Länder, amounted to EUR 3,750 million in 2023, of which EUR 3,300 million has been paid in pro rata by the Federal Republic and the Länder.

43

MANAGEMENT AND EMPLOYEES

The bodies of KfW are the Executive Board (Vorstand) and the Board of Supervisory Directors (Verwaltungsrat).

Executive Board

The Executive Board is responsible for the day-to-day conduct of KfW’s business and the administration of its assets. Typically, members of the Executive Board are initially appointed for a maximum of three years by the Board of Supervisory Directors. After the first term each member may be repeatedly reappointed for, or his or her term of office may be repeatedly extended by, up to five years by the Board of Supervisory Directors. Each member of the Executive Board is responsible for certain aspects of KfW’s activities but shares the responsibility for actions taken by the Executive Board.

The following biographical information on the current members of the Executive Board includes their dates of birth, the year in which they were appointed, their terms of office, their current positions and their areas of responsibility.

For information on the remuneration of the Executive Board, see note 68 to the financial statements included in Exhibit (e) to this annual report.

Stefan Wintels

Date of birth: November 17, 1966

Stefan Wintels joined KfW’s Executive Board as Co-CEO in October 2021 and became the sole CEO in November 2021. He is in charge of the General Secretariat, Group Communications, Internal Auditing, Financial Markets, Group Development and Economics, as well as Legal Affairs. Mr. Wintels was appointed until September 2025.

Prior to joining KfW, Mr. Wintels worked at Citigroup for 20 years from 2001 to 2021 in various leadership roles. Most recently, he was the Global Co-Head Financial Institutions Group and a member of the Global BCMA Executive Committee. Before that, he was Vice Chairman of Citigroup in Germany, Citi’s Chief Country Officer for Germany as well as Chief Executive Officer of Citigroup Global Markets Europe AG until March 2020.

Stefan Wintels began his professional career in 1994 at Deutsche Bank AG and left in 2001 as Managing Director at Deutsche Bank’s Corporate Development / Group Strategy Department.

He received a Master’s degree in Business Administration from the Technische Universität Berlin and participated in the second year of a two year MBA program at the University of Illinois, Urbana-Champaign.

Stefan Wintels also chairs the supervisory board of KfW Capital, Frankfurt am Main, Germany. In addition, he is a member of the supervisory boards of Deutsche Post AG, Bonn, Germany and of Deutsche Telekom AG, Bonn, Germany.

Katharina Herrmann

Date of birth: October 27, 1968

Katharina Herrmann joined KfW as General Manager in April 2022 and became a member of KfW’s Executive Board in April 2023. She is in charge of KfW’s Domestic Promotional Business (Individual Financing Solutions & Public Clients, SME Bank & Private Clients), Sales Digital Development and KfW Capital. Ms. Herrmann was appointed until April 2026.

Prior to joining KfW she was Head of Platforms and New Business at ING-DiBa AG, Frankfurt am Main, Germany, as well as Global Head of Platforms and Beyond Banking at ING Group, Amsterdam, Netherlands. During her time at ING from 1998 until 2021 Ms. Herrmann held various leadership positions. From 1996 until 1998 Ms. Herrmann worked as a Specialist in Marketing at COMMERZBANK AG, Frankfurt am Main, Germany. In 1995 she started her professional career at Nassauische Sparkasse, Wiesbaden, Germany, where she worked in junior and senior positions in marketing.

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Katharina Herrmann studied business administration and graduated as Diplom-Betriebswirtin (FH) at the University of Applied Sciences Wiesbaden, Germany (comparable to Master of Business administration), including several months of study abroad (European Business Studies) at Nottingham Trent University, United Kingdom.

Melanie Kehr

Date of birth: November 17, 1974

Melanie Kehr became a member of KfW’s Executive Board in March 2019. She is in charge of Information Technology, Operations and Transaction Management. Ms. Kehr joined KfW as General Manager in September 2018. Ms. Kehr was appointed until August 2027.

Ms. Kehr studied Business Administration at the University of Bielefeld, Germany, and also holds a Master’s degree in Economics from Purdue University, Indiana, USA. In 1999, she started her professional career at the consulting firm Andersen Consulting Unternehmensberatung GmbH (renamed Accenture in 2001) where she became Managing Director for Industry Financial Services in 2012. In 2014, she was appointed Group Chief Information Officer of Bayerische Landesbank, Munich, Germany, and served in this position until July 2018.

Ms. Kehr is also a member of the supervisory board of Deka Bank Deutsche Girozentrale, Frankfurt am Main, Germany.

Christiane Laibach

Date of birth: November 9, 1961

Christiane Laibach joined KfW’s Executive Board in June 2021. She leads the international financing activities consisting of KfW Entwicklungsbank and the two affiliates KfW IPEX GmbH (Export and Project Finance) and KfW DEG mbH. Ms. Laibach was appointed until May 2025.

Prior to joining KfW’s Executive Board she was member of DEG’s Management Board for six years, the last year as CEO. From 2008 to 2015 she was part of KfW-IPEX Bank’s Management Board, including Chief Risk and Financial Officer. She has been holding leadership positions at KfW Group for 25 years after having joined in 1990, including as global head of aviation for seven years.

Ms. Laibach holds a Master’s degree in Economics from University of Mainz, Germany, and completed the Executive Management Program at Wharton Business School, Philadelphia, USA.

Ms. Laibach also chairs the supervisory board of KfW IPEX GmbH. Further, she serves as first deputy chair of the supervisory board of DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, Cologne, Germany.

Bernd Loewen

Date of birth: October 23, 1965

Bernd Loewen joined KfW as a member of KfW’s Executive Board in July 2009. He is in charge of Finance, Human Resources, Central Services as well as Organization and Consulting. Mr. Loewen acts as Chief Financial Officer of KfW after initially running both the risk and finance departments at KfW up to the separation of the CRO and CFO functions as of January 1, 2016. Mr. Loewen was appointed until June 2027.

After graduating with a Business Administration degree from the University of Muenster, Germany, he started his professional career at an auditing firm and completed the tax consultant exam. Subsequently, Mr. Loewen joined the Corporate Development department at COMMERZBANK Aktiengesellschaft, Frankfurt am Main, Germany, before moving on to Equity Derivatives Trading. From 2002 onwards, Bernd Loewen worked as Co-Managing Director at Commerz Capital Markets Corporation, a subsidiary of COMMERZBANK Aktiengesellschaft, in New York, USA. In 2005, he was appointed Member of the Management Board of mBank (formerly BRE Bank SA), a Polish subsidiary of COMMERZBANK Aktiengesellschaft and relocated from New York to Warsaw, Poland.

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Mr. Loewen is also a member of the supervisory board of DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, Cologne, Germany.

Dr Stefan Peiß

Date of birth: April 30, 1969

Dr Stefan Peiß became a member of KfW’s Executive Board in January 2016. He is in charge of Credit Risk Management, Risk Controlling and Compliance, and he acts as Chief Risk Officer of KfW. Dr Peiß was appointed until December 2029.

Dr Peiß studied business administration at the Ludwig-Maximilians-Universität in Munich, Germany, where he also obtained a doctorate in political science (Dr. oec. publ.) from the university’s Institute for Risk Management and Insurance. In 1995, he started his career in the Real Estate Department of Bayerische Landesbank, Germany. He then transferred to the Risk Management Department, where he held management positions as Head of Team (client portfolio and strategic controlling) and Head of Department (portfolio controlling and controlling systematics, risk controlling trading activities). In 2007, Dr Peiß became Head of the Risk Operations Division, and in 2008, he was promoted to Head of Group Risk Control Division. Dr Peiß joined KfW in 2009 as Senior Vice President and Head of Risk Management and Controlling.

Dr Peiß is a member of the supervisory board of KfW IPEX-Bank, Frankfurt am Main, Germany and serves as deputy chairman of KfW Capital’s supervisory board, Frankfurt am Main, Germany.

Board of Supervisory Directors

The Board of Supervisory Directors generally has 37 members and consists of the Federal Minister of Finance; the Federal Minister for Economic Affairs and Climate Action; the Federal Minister for Foreign Affairs; the Federal Minister of Food and Agriculture; the Federal Minister of Transport and Digital Infrastructure; the Federal Minister for Economic Cooperation and Development; the Federal Minister for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection; seven members appointed by the Bundesrat; seven members appointed by the Bundestag; five representatives of commercial banks; two industry representatives; one representative each of the local municipalities, agricultural, skilled crafts, trade and housing sectors; and four representatives of the trade unions. The representatives of the commercial banks, industry, the local municipalities, agricultural, skilled crafts, trade and housing sectors, and the trade unions are appointed by the Federal Government after consultation with their constituencies.

The Federal Minister of Finance and the Federal Minister for Economic Affairs and Climate Action serve as Chairman and Deputy Chairman of the Board of Supervisory Directors on a year-by-year rotating basis, with the latter chairing for the year 2024. The term of office of all Federal Ministers on KfW’s Board of Supervisory Directors corresponds to their term of office as Federal Minister of such Federal Ministry, while the other members of the Board of Supervisory Directors are personally appointed for a term of three years.

The Board of Supervisory Directors supervises the overall conduct of KfW’s business and the administration of its assets. It may give the Executive Board general directives. In particular, the Board of Supervisory Directors (via its Risk and Credit Committee) generally must approve, inter alia, loans to members of management bodies (Organkredite), short-term financing, loan commitments to a single borrower exceeding EUR 50 million for non-investment grade or unrated borrowers, certain unsecured loans and loan commitments exceeding EUR 100 million to investment grade borrowers. The Board of Supervisory Directors may reserve the right to approve other transactions or types of transactions. However, it is not authorized to represent KfW or to commit funds on KfW’s behalf.

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KfW’s Board of Supervisory Directors’ committee structure comprises a Presidial and Nomination Committee (Präsidial-  und Nominierungsausschuss), a Remuneration Committee (Vergütungskontrollausschuss), a Risk and Credit Committee (Risiko-  und Kreditausschuss) and an Audit Committee (Prüfungsausschuss). The Presidial and Nomination Committee is responsible for dealing with legal and administrative matters as well as fundamental business and corporate policy issues. It may make decisions on the Board of Supervisory Directors’ behalf in urgent matters (Eilentscheidung). Additionally, it regularly assesses the Executive Board and the Board of Supervisory Directors, provides recommendations for suitable candidates to the Executive Board and may assist the responsible federal agencies in appointing members to the Board of Supervisory Directors. The Remuneration Committee is responsible for dealing with the systems of remuneration for the Executive Board and KfW employees and their consequences for KfW’s risk, capital and liquidity management and advises the Presidial and Nomination Committee with respect to the remuneration paid to the members of the Executive Board. The Risk and Credit Committee advises the Board of Supervisory Directors regarding, in particular, the current and future overall risk tolerance and strategy of KfW. It is responsible for approving loans and equity investments at the operational level that exceed certain thresholds as set forth in KfW’s Bylaws, as well as for authorizing the issuance of debt securities, borrowings in foreign currencies and swap transactions. The Audit Committee monitors in particular the accounting process and the effectiveness of the risk management system, especially the internal control system and the internal audit system. It monitors the performance of the audits of the annual financial statements and the timely correction of any errors identified by the auditor. Furthermore, the Audit Committee provides recommendations to the Board of Supervisory Directors regarding the approval of the annual unconsolidated financial statements and the adoption of the annual consolidated financial statements. The Presidial and Nomination Committee and the Remuneration Committee will, as a general rule, be chaired by the Chairperson of the Board of Supervisory Directors. The Risk and Credit Committee and the Audit Committee, as a general rule, will be chaired by a representative of the banking sector.

As of May 13, 2024, the members of the Board of Supervisory Directors were:

Name	Position
Annalena Baerbock	Federal Foreign Minister
Katharina Beck	Member of Parliament; appointed by the Bundestag
Volker Bouffier	Former Minister President of the State of Hesse; appointed by the Bundesrat
Dr Andreas Dressel	Senator for Finance of the Free and Hanseatic City of Hamburg; appointed by the Bundesrat
Yasmin Fahimi	Chair of the Confederation of German Trade Unions (DGB), representative of the trade unions
Björn Fecker	Mayor and Senator for Finance of the Free Hanseatic City of Bremen; appointed by the Bundesrat
Robert Feiger	Chair of the Federal Executive Committee of the IG Bauen-Agrar-Umwelt Trade Union (IG Bau); representative of the trade unions
Tanja Gönner	CEO and Director General of the Federation of German Industries (BDI); representative of the industry
Olav Gutting	Member of Parliament; appointed by the Bundestag
Dr Robert Habeck	Federal Minister for Economic Affairs and Climate Action; Chair in 2024
Gerald Heere	Minister of Finance of the State of Lower Saxony; appointed by the Bundesrat
Prof Dr Hans-Günter Henneke	Managing Member of the Executive Committee of the Federation of German Districts (DLT); representative of the municipalities
Marion Höllinger	Member of the Board of Directors of the Association of German Banks (BdB); representative of the commercial banks

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Harald Hübner	Ministerial Director at the Bavarian State Ministry of Finance and Regional Identity; appointed by the Bundesrat
Verena Hubertz	Member of Parliament; appointed by the Bundestag
Dr Dirk Jandura	President of the Federation of German Wholesale, Foreign Trade and Services (BGA); representative of the wholesale and foreign trade sector
Andrea Kocsis	Deputy Chair of ver.di - United Services Trade Union; representative of the trade unions
Stefan Körzell	Member of the Executive Board of the German Trade Union Confederation (DGB); representative of the trade unions
Ulrich Lange	Member of Parliament; appointed by the Bundestag
Steffi Lemke	Federal Minister for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection
Christian Lindner	Federal Minister of Finance; Deputy Chair in 2024
Rainer Neske	Chair of the Board of Managing Directors at Landesbank Baden-Württemberg (LBBW); representative of credit institutions prominent in the field of industrial credit
Cem Özdemir	Federal Minister of Food and Agriculture
Dr Marcus Optendrenk	Minister of Finance of the State of North Rhine-Westphalia; appointed by the Bundesrat
Dr Bettina Orlopp	Deputy Chair of Commerzbank AG; representative of the mortgage banks
Daniel Quinten	Member of the Board of Managing Directors of the National Association of German Cooperative Banks (BVR); representative of the cooperative banks
Prof Dr Ulrich Reuter	President of the German Savings Banks Association (DSGV); representative of the savings banks
Michael Richter	Minister of Finance of the State of Saxony-Anhalt; appointed by the Bundesrat
Dr Thorsten Rudolph	Member of Parliament; appointed by the Bundestag
Joachim Rukwied	President of the German Farmers’ Association (DBV); representative of the agricultural sector
Frank Schäffler	Member of Parliament; appointed by the Bundestag
Jan Wenzel Schmidt	Member of Parliament; appointed by the Bundestag
Svenja Schulze	Federal Minister for Economic Cooperation and Development
Holger Schwannecke	Secretary General of the German Confederation of Skilled Crafts (ZDH); representative of the skilled crafts sector
Dr Martin Wansleben	Chief Executive of the Association of German Chambers of Commerce and Industry (DIHK); representative of the industry
Dr Kai H Warnecke	President Haus & Grund Germany; representative of the housing sector
Dr Volker Wissing	Federal Minister for Digital and Transport

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For information concerning the remuneration of the Board of Supervisory Directors, see note 68 to the financial statements included in Exhibit (e) to this annual report.

Employees

In 2023, KfW Group employed an average of 8,149 persons (excluding members of the Executive Board and trainees, but including temporary personnel and local personnel in KfW’s representative offices) (2022: 7,984 persons). Approximately 30.0% of KfW’s staff (excluding local personnel in KfW’s representative offices) is covered by collective bargaining agreements. KfW provides employee benefits such as pensions to its employees.

Of KfW Group’s staff, approximately 19.1% is engaged in KfW’s domestic business activities, 28.6% in promotion of developing countries and emerging economies (KfW Entwicklungsbank and DEG), 11.3% in Export and Project Finance (KfW IPEX-Bank), and the remaining balance in KfW’s accounting, disbursements, collateral, funding and lending support departments and in general administrative and staff functions.

KfW Group has defined employee relations as one of its key sustainability action areas and attaches great importance to treating its employees with respect and appreciation. Because KfW recognizes that its success is based on its skilled and motivated staff, employer attractiveness, including by achieving top positions in the main employer rankings, has been defined as one of the key targets within KfW Group’s strategic objectives. KfW believes that a fair remuneration system, group-wide diversity and equal opportunities for the professional development of all employees, irrespective of gender, origin, ethnicity, religion, disability, age, sexual identity or social background, provide a solid basis for achieving this target. KfW emphasizes the importance of achieving target quotas for women in leadership positions and a good work-life balance. As a future-oriented organization, KfW offers a variety of part-time work and mobile work options as well as professional development and training opportunities and supports responsible health management.

For more information concerning KfW Group’s employees, see note 67 to the financial statements included in Exhibit (e) to this annual report.

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THE FEDERAL REPUBLIC OF GERMANY

The following information regarding the Federal Republic is derived from the public official documents cited below. Certain information is preliminary.

GENERAL

Area, Location and Population

The Federal Republic is situated in central Europe and comprises an area of approximately 358,000 square kilometers (about 138,000 square miles). According to a first estimate of the Federal Statistical Office, approximately 84.7 million people were living in Germany at the end of 2023, which represents an increase of 0.3 million compared to the end of 2022. The increase corresponds to the average increase for the years 2012 to 2021 and was significantly lower than in 2022, when the population increased by 1.1 million people, mainly due to strong immigration from Ukraine. Net immigration (defined as immigration minus emigration) was the sole cause of population growth in 2023. According to the first estimate, in 2023 between 680,000 and 710,000 more people came to Germany than left the country. Compared to the years with particularly high refugee migration (2015: +1.14 million; 2022: +1.46 million), net immigration in 2023 was significantly lower. From a long-term perspective, however, net immigration remained at a high level, only comparable to the years 1991 (+603,000) and 1992 (+782,000), when many ethnic German repatriates from the former Soviet Union and war refugees from the former Yugoslavia came to Germany. In contrast, as in all years since German reunification in 1990, more people died than were born in 2023, which had a dampening effect on population growth. In 2023, the number of births fell by around 7% compared to 2022 and is expected to be between 680,000 and 700,000 (2022: 738,819), whereas the number of deaths decreased by around 4% to at least 1.02 million (2022: 1.07 million), resulting in a birth deficit (difference between births and deaths) of at least 320,000. At the end of 2022, approximately 17.5% of the total population was concentrated in metropolitan areas with more than 500,000 inhabitants; the largest of these areas were (in descending order) Berlin, Hamburg, Munich, Cologne and Frankfurt am Main.

Sources: Statistisches Bundesamt, Bundesländer mit Hauptstädten nach Fläche, Bevölkerung und Bevölkerungsdichte am 31.12.2022 (September 2023)

(https://www.destatis.de/DE/Themen/Laender-Regionen/Regionales/Gemeindeverzeichnis/Administrativ/02-bundeslaender.html); Statistisches Bundesamt, Bevölkerung wächst im Jahr 2023 um gut 0,3 Millionen Personen, press release of January 25, 2024

(https://www.destatis.de/DE/Presse/Pressemitteilungen/2024/01/PD24_035_124.html); Statistisches Bundesamt, Städte (Alle Gemeinden mit Stadtrecht) nach Fläche, Bevölkerung und Bevölkerungsdichte am 31.12.2022 (September 2023)

(https://www.destatis.de/DE/Themen/Laender-Regionen/Regionales/Gemeindeverzeichnis/Administrativ/05-staedte.html).

G-1

The following table shows selected key demographic figures for the Federal Republic for the years stated.

POPULATION

	2022		2021		2020		2019		2018
	(number of persons)
Total population		84,358,845		83,237,124		83,155,031		83,166,711		83,019,213
Age distribution		(percent of total population)
Under 20		18.8		18.5		18.4		18.4		18.4
20-40		24.5		24.4		24.5		24.6		24.6
40-60		27.3		27.7		28.1		28.4		28.8
60-80		22.2		22.0		21.8		21.7		21.7
80 and more		7.2		7.3		7.1		6.8		6.5
Growth rate		(percent change on the previous year)
Total population		0.1		0.1		0.0		0.2		0.3
Under 20		2.8		0.6		0.0		0.2		0.3
20-40		1.6		-0.3		-0.5		0.1		0.5
40-60		-0.3		-1.3		-1.1		-1.1		-0.8
60-80		2.3		0.9		0.5		0.4		0.3
80 and more		0.0		3.0		4.5		5.4		4.6

Source: Statistisches Bundesamt, Bevölkerung, Bevölkerungsstand, Bevölkerung nach Altersgruppen (ab 2011)
(https://www.destatis.de/DE/Themen/Gesellschaft-Umwelt/Bevoelkerung/Bevoelkerungsstand/Tabellen/liste-altersgruppen.html).

Without the surplus resulting from net immigration, the total population would have fallen every year since German reunification in 1990 because more people died than were born in each year. These developments are expected to continue, together with the continued aging of the population. According to the 15^th coordinated population projection of the Federal Statistical Office published in December 2022 and covering the period until 2070, the number of people of retirement age (which will be 67 years from 2031 onwards) or over in Germany will rise by roughly 4 million to at least 20 million by the mid-2030s. The number of people of working age (20 to 66 years), which currently comprises 51.4 million people, will decrease by between 1.6 and 4.8 million in the next 15 years, which may result in a downward pressure on Germany’s growth potential in the long term. The number of those aged 80 or over will remain relatively stable until the middle of the 2030s, amounting to between 5.8 and 6.7 million. Subsequently, this elderly population is expected to increase massively, along with the related need for long-term care. If net immigration remains at the level of the past decade of about 400,000 persons per year on average, roughly 90 million people would live in Germany in 2070. However, with a low level of net immigration of 180,000 people per year, the population would fall to 75 million people in 2070.

Sources: Statistisches Bundesamt, Bevölkerung wächst im Jahr 2023 um gut 0,3 Millionen Personen, press release of January 25, 2024

(https://www.destatis.de/DE/Presse/Pressemitteilungen/2024/01/PD24_035_124.html); Federal Statistical Office, 4 million more people aged 67 or over will live in Germany in 2035, press release of December 2, 2022

(https://www.destatis.de/EN/Press/2022/12/PE22_511_124.html; German version: https://www.destatis.de/DE/Presse/Pressemitteilungen/2022/12/PD22_511_124.html).

Government

The Federal Republic is a federated republic whose constitution is codified in the Grundgesetz of 1949. The capital of the Federal Republic is Berlin. The Federal Republic consists of 16 federal states (Länder). The Länder have legislative sovereignty over matters not expressly reserved to the legislative, executive and judicial bodies of the Federal Republic.

The Grundgesetz provides for a Federal President (Bundespräsident), two Houses of Parliament (the Bundestag and the Bundesrat, the latter consisting of representatives of the 16 Länder governments), a Chancellor (Bundeskanzler) and a Federal Constitutional Court (Bundesverfassungsgericht). The Chancellor heads the Federal Government (Bundesregierung), consisting of the Chancellor and the Federal Ministers. The Bundespräsident acts as head of state.

G-2

General elections for the Bundestag are generally held every four years on the basis of an electoral system of proportional representation. The last general election was held on September 26, 2021.

A political party is not entitled to party representation in the Bundestag unless it receives at least 5% of the votes cast or three direct mandates, awarded to the candidate with the most votes in a given electoral district, in a general election. Upon proposal by the Bundespräsident, the Chancellor is elected by and is responsible to the Bundestag.

Political Parties

The political parties currently represented in the Bundestag are: the Social Democratic Party (SPD); the Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU); the Greens (Bündnis 90/Die Grünen); the Free Democratic Party (FDP); the Alternative for Germany (AfD); the Left-Wing Party (Die Linke) and the Südschleswigscher Wählerverband (SSW), which participates in the distribution of seats of the Bundestag as a party representing the Danish minority in Federal State of Schleswig-Holstein, to which the five percent of the votes cast or three direct mandates threshold for participation in the Bundestag does not apply.

Since 1949, the Federal Republic has been governed by nine Chancellors over 20 electoral periods. The most recent general election, held in September 2021, resulted in a coalition between the Social Democratic Party (SPD), the Greens (Bündnis 90/Die Grünen) and the Free Democratic Party (FDP). On December 8, 2021, the Bundestag elected Olaf Scholz (SPD), who served as Finance Minister in the previous Federal Government, Chancellor for the first time.

Sources: The Federal Returning Officer, 2021 Bundestag Election: final result, press release of October 15, 2021

(https://www.bundeswahlleiterin.de/en/info/presse/mitteilungen/bundestagswahl-2021/52_21_endgueltiges-ergebnis.html); Deutscher Bundestag, Election of Members and the allocation of seats, October 18, 2021

(https://www.bundestag.de/en/parliament/elections/arithmetic); The Federal Government, New Federal Government in office, December 8, 2021

(https://www.bundesregierung.de/breg-en/service/archive/federal-chancellor-election-1989862).

The following table shows the results of the five most recent general elections for the Bundestag.

ELECTION RESULTSTOTHE BUNDESTAG

	2021 Elections				2017 Elections				2013 Elections				2009 Elections				2005 Elections
	% of Votes		Seats		% of Votes		Seats		% of Votes		Seats		% of Votes		Seats		% of Votes		Seats
SPD		25.7		206		20.5		153		25.7		193		23.0		146		34.2		222
CDU/CSU		24.1		197		33.0		246		41.5		311		33.8		239		35.2		226
Bündnis 90/Die Grünen		14.8		118		8.9		67		8.4		63		10.7		68		8.1		51
FDP		11.5		92		10.7		80		4.8		—		14.6		93		9.8		61
AfD		10.3		83		12.6		94		4.7		—		—		—		—		—
Die Linke.		4.9		39		9.2		69		8.6		64		11.9		76		8.7		54
SSW (1)		0.1		1		—		—		—		—		—		—		—		—
Others		8.6		—		5.0		—		6.2		—		6.0		—		3.9		—
Total				736				709				631				622				614

(1) SSW (Südschleswigscher Wählerverband), representing the Danish minority in the federal state of Schleswig-Holstein, is exempt from the five percent of the votes cast or three direct mandates threshold for representation in the Bundestag.

Sources: The Federal Returning Officer, 2021 Bundestag Election: final result, press release of October 15, 2021
(https://www.bundeswahlleiterin.de/en/info/presse/mitteilungen/bundestagswahl-2021/52_21_endgueltiges-ergebnis.html); The Federal Returning Officer, Bundestag election 2017

(https://www.bundeswahlleiterin.de/en/bundestagswahlen/2017/ergebnisse/bund-99.html); Statistisches Bundesamt, Statistisches Jahrbuch 2016, Tables 10.1.1 and 10.1.2; Statistisches Bundesamt, Statistisches Jahrbuch 2011, Tables 4.3.1, 4.3.2 and 4.6.

G-3

International Organizations

In addition to the European Union (“EU”), the Federal Republic is a member of various major multilateral institutions, including the United Nations, the International Monetary Fund (“IMF”), the International Bank for Reconstruction and Development and the International Development Association, the Council of Europe, the Organization for Economic Cooperation and Development and the North Atlantic Treaty Organization. Furthermore, the Federal Republic is a signatory to the General Agreement on Tariffs and Trade and a member of the World Trade Organization (“WTO”). It is also a shareholder of, among others, the European Investment Bank (“EIB”), the European Bank for Reconstruction and Development, the Asian Infrastructure Investment Bank and the European Atomic Energy Community.

The European Union and European Integration

The Federal Republic was one of the six founding members of the European Coal and Steel Community in 1951, which later developed into the EU. Since its foundation, the EU has grown considerably. Following the withdrawal of the United Kingdom from the EU on January 31, 2020, 27 countries currently form part of the EU. These include Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain and Sweden (together, the “EU Member States”). According to provisional data, the aggregate population of the 27 EU Member States was approximately 448 million as of January 1, 2023. Formal accession negotiations are currently being conducted with Montenegro, Serbia, Albania, North Macedonia and Türkiye. While Türkiye is a key strategic partner of the EU on issues including migration, security, counter-terrorism, and the economy, accession negotiations with Türkiye have not progressed in recent years. In 2022 the European Council granted Ukraine, Moldova and Bosnia and Herzegovina the status of candidate countries. In addition, in 2023 Georgia was granted candidate status by the European Council, on the understanding that it will take relevant steps, as set out in the European Commission recommendation dated November 2023. Kosovo applied for EU membership in December 2023. Since 2016, a Stabilization and Association Agreement between the EU and Kosovo has been in force.

Sources: European Union, Principles, countries, history, History of the EU (https://european-union.europa.eu/principles-countries-history/history-eu_en); European Union, Principles, countries, history, History of the EU, History of the European Union 1945-59 (https://european-union.europa.eu/principles-countries-history/history-eu/1945-59_en); European Union, Principles, countries, history, EU countries (https://european-union.europa.eu/principles-countries-history/eu-countries_en#the-27-member-countries-of-the-eu); Statistical Office of the European Communities, Total population

(https://ec.europa.eu/eurostat/databrowser/view/tps00001/default/table?lang=en); European Commission, Enlargement Policy

(https://neighbourhood-enlargement.ec.europa.eu/enlargement-policy_en).

Political Integration

The EU is based on treaties that are binding agreements between the EU Member States and have been approved voluntarily and democratically by all EU Member States. The treaties set out the EU’s objectives, the rules governing the EU institutions, the way decisions are taken and the relationship between the EU and the EU Member States. Treaties are amended from time to time to make the EU more efficient and transparent, to prepare for the accession of candidate countries as new EU Member States and to introduce new areas of cooperation. Under the treaties currently in place, EU institutions can adopt legislation, which, depending on the subject matter, either becomes directly applicable law or requires further implementation by the EU Member States.

The EU’s three main institutions are the Council of the EU (representing the governments of the EU Member States) (the “Council”), the Parliament (elected by and representing the citizens of the EU Member States) and the European Commission (the executive body of the EU). In addition, the European Council, which consists of the heads of state or government of the EU Member States, the European Council President and the President of the European Commission, defines the EU’s overall political direction and priorities. It is not one of the EU’s legislating institutions, but rather sets the EU’s policy agenda, traditionally by adopting conclusions during European Council meetings which identify issues of concern and actions to take.

Article 50 of the Treaty on European Union provides for a mechanism for the voluntary and unilateral withdrawal of an EU Member State from the EU. Pursuant to Article 50, the withdrawal process is initiated by a notification from the EU Member State wishing to withdraw to the European Council. The EU treaties cease to apply to an EU Member State from the later of the date of entry into force of an agreement setting out arrangements for the EU Member State’s withdrawal, or within two years of the notification of the withdrawal. The European Council may, in agreement with the EU Member State concerned, unanimously decide to extend the period beyond two years.

G-4

EU Sanctions. Restrictive measures, also known as sanctions, are an essential tool of the EU’s Common Foreign and Security Policy. All restrictive measures adopted by the EU are fully compliant with its obligations under international law, including those pertaining to human rights and fundamental freedoms. The first step in adopting restrictive measures is through a proposal by the High Representative of the Union for Foreign Affairs and Security Policy. After this, the Common Foreign and Security Policy Council resolves on any restrictive measures by way of a decision binding on EU Member States. Any restrictive measures which include economic or financial sanctions additionally require the adoption of an accompanying Council regulation. Regulations are directly applicable within the EU and are binding on individuals and entities, including economic operators. Decisions and regulations on sanctions must be adopted unanimously by the Council. The regulation defines the precise scope of the measures and details of their implementation. In December 2023, the Council and the Parliament reached an agreement on an EU directive which will criminalize the violation of EU sanctions. This policy change gained particular traction in the context of Russia’s invasion of Ukraine.

As part of the EU response to Russia’s invasion of Ukraine the EU adopted a set of comprehensive restrictive measures against Russia and Russian individuals in addition to the prior sanctions that were imposed after the illegal annexation of Crimea in 2014. In addition, sanctions were issued against Belarus in response to their involvement in this invasion and against Iran in relation to the manufacturing and supply of drones. The sanctions imposed comprise, among others, individual and economic sanctions. In March 2024, 1,706 Russian individuals, including Russian President Vladimir Putin and Russian Foreign Minister Sergey Lavrov, and 419 entities were subjected to an asset freeze and/or a travel ban because their actions undermined Ukraine’s territorial integrity, sovereignty and independence. The lists of sanctioned persons and entities are kept under constant review and are subject to periodic renewals by the Council. The economic sanctions, which target exchanges with Russia and Belarus in specific economic sectors, include restricted access to EU capital markets for certain Russian banks and companies, a ban on transactions with the Russian Central Bank and the Central Bank of Belarus, a ban of a number of Russian and Belarusian banks from the SWIFT messaging network, a prohibition on the provision of euro-denominated banknotes to Russia and Belarus, a prohibition on the provision of crypto-wallets to Russia, a ban on coal and other solid-fossil-fuel imports from Russia, a price cap related to the maritime transport of crude oil and petroleum products, a ban on use of EU airspace and EU airports by Russian-owned, Russian-registered or Russian-controlled aircraft, a ban on exports to and imports from Russia of raw materials, goods and technology in various sectors, a ban on exports to Russia of dual-use goods, an export and import ban on arms and a prohibition on the provision of certain services to Russia or Russian persons, including the provision of software for the management of enterprises.

Sources: European Commission, Europe in 12 lessons by Pascal Fontaine

(https://op.europa.eu/en/publication-detail/-/publication/a5ba73c6-3c6a-11e8-b5fe-01aa75ed71a1); EUR-Lex, Treaties currently in force (https://eur-lex.europa.eu/collection/eu-law/treaties/treaties-force.html); European Council, Council of the European Union, The European Council

(https://www.consilium.europa.eu/en/european-council/); EUR-Lex, Consolidated versions of the Treaty on European Union, Article 50

(https://eur-lex.europa.eu/eli/treaty/teu_2016/art_50/oj); European Council, Council of the European Union, Policies, Why the EU adopts sanctions, accessed on May 3, 2024

(https://www.consilium.europa.eu/en/policies/why-sanctions/); European Council, Council of the European Union, Policies, EU sanctions against Russia, accessed on May 3, 2024

(https://www.consilium.europa.eu/en/policies/sanctions-against-russia/); European Council, Council of the European Union, Policies, EU sanctions against Belarus, accessed on May 3, 2024 (https://www.consilium.europa.eu/en/policies/sanctions-against-belarus/).

Economic Integration

From its inception, the EU has had the fundamental objective, in line with its predecessors, of economic integration of its member states. After a long process, a single market that provides for the free movement of goods and services, persons and capital among the EU Member States was established as of January 1, 1993. The integration of the EU Member States’ economies and the completion of a single market are also promoted by a European competition policy, which aims at creating a level-playing field for EU Member States’ companies, thereby promoting economic efficiency, and by a European consumer policy. In addition, various liberalization and harmonization measures are being implemented, for example in the telecommunication and energy sectors. In the financial sector, the single market has been fostered by providing for the free movement of capital and the freedom to perform banking services throughout the EU under the “single passport,” which enables financial institutions to provide financial services throughout the EU based on a single license obtained in one EU Member State. The EU promotes economic integration with regional aid, which is designed to focus development efforts on certain disadvantaged regions and sections of population of the EU. Another important policy area for the EU has been agriculture and fisheries.

G-5

State Aid. EU Member States may generally only grant state aid to companies within the narrow framework of the EU’s regulations and procedures on state aid in order to safeguard a level-playing field within the single market. To enable EU Member States to support their national economies during the COVID-19 pandemic the European Commission adopted a temporary framework for state aid measures (the “COVID Temporary Framework”) in March 2020, permitting EU Member States to provide certain types of direct support to companies and small enterprises affected by the COVID-19 pandemic. These support measures were therefore subject to less stringent conditions than would normally have been applicable. The COVID Temporary Framework was amended and extended several times. It expired on June 30, 2022, albeit with some exceptions. In particular, investment and solvency support measures were still permitted to be implemented until December 31, 2023. In addition, the COVID Temporary Framework provided for a flexible transition, under clear safeguards, for the conversion and restructuring of debt instruments, such as loans and guarantees, into other forms of support, such as direct grants, until June 30, 2023. The COVID Temporary Framework provided the basis for a number of German governmental support measures at the federal and regional (Länder) levels in connection with the COVID-19 pandemic, including for example the KfW Special Loan Program.

Similar considerations led to the adoption of a temporary crisis framework for state aid in March 2022 as part of the EU response to Russia’s invasion of Ukraine. This framework is referred to as “Temporary Crisis and Transition Framework” and has been amended and extended several times. The framework provides for several types of aid that may be granted by the EU Member States. The allowance for the provision of liquidity support in the form of state guarantees and subsidized loans, which help ensure that sufficient liquidity remains available to businesses, expired in December 2023. Pursuant to the framework, EU Member States are still permitted to compensate companies for the additional costs incurred due to exceptionally high gas and electricity prices, to incentivize the reduction of electricity consumption and to grant limited amounts of aid to companies affected by the current crisis until June 30, 2024. In addition, until December 31, 2025, EU Member States may grant support to foster the transition to a net-zero economy. In particular, state aid may be granted to accelerate the roll-out of renewable energy, including renewable energy storage and renewable heat technologies, and to decarbonize industrial production processes.

The EU Budget and the EU Recovery Instrument. The EU’s expenditures are governed by a long-term budget, also referred to as multiannual financial framework (“MFF”). The MFF is meant to ensure that the EU’s expenditures develop in an orderly manner and within the limits of its own resources. It aims to align spending with policy priorities, to increase predictability of EU finances for co-financers and beneficiaries, to ensure EU budgetary discipline and to facilitate the adoption of the annual EU budget. It sets overall spending limits by determining annual maximum amounts for commitment appropriations, which cover commitments made to spend funds over one or more years in certain expenditure categories and for payment appropriations.

The regulation laying down the MFF of the EU for the years 2021 to 2027 was formally adopted in December 2020. In February 2024, the Council revised the MFF, making additional funding available to address new and emerging challenges in the EU. The long-term EU budget provides EUR 1.211 trillion (in current prices) in commitment appropriations. Together with the new temporary Next Generation EU recovery instrument (the “EU Recovery Instrument”) of up to EUR 806.9 billion (in current prices), which is specifically aimed at addressing the socioeconomic consequences of the COVID-19 pandemic, this allows the EU to provide an unprecedented amount of approximately EUR 2.018 trillion to help repair the economic and social damage caused by the COVID-19 pandemic in Europe and support the transition towards a modern and more sustainable Europe, including the green and digital transitions. Following Russia’s invasion of Ukraine, the EU budget was used to provide emergency assistance and support in Ukraine and in the EU Member States, and to alleviate the humanitarian consequences of the war.

The most important component of the EU Recovery Instrument is the Recovery and Resilience Facility (“RRF”), with up to EUR 723.8 billion (in current prices) in loans and grants available to support reforms and investments undertaken by the EU Member States. The balance of the funds under the EU Recovery Instrument is being employed through existing EU instruments and assistance programs. To access the RRF, EU Member States are required to submit national recovery and resilience plans which are assessed by the European Commission and then approved by the Council of the EU on a case-by-case basis. After a prefinancing of 13% of the total support available to the relevant EU Member State, an EU Member State may request further disbursements up to twice a year upon reaching certain agreed milestones and targets. As of February 2024, the European Commission had disbursed EUR 224.2 billion to EU Member States under the RRF, thereof EUR 144.0 billion in the form of grants and EUR 80.2 billion in the form of loans. In February 2023, the European Parliament and the Council adopted an amending regulation to include REPowerEU chapters in the RRF. The purpose of REPowerEU is to strengthen the strategic autonomy of the EU by diversifying its energy supplies and ending its dependency on Russian fossil fuel imports. EU Member States may add a new REPowerEU chapter to their national recovery and resilience plans, in order to finance key investments and reforms that will help achieve the REPowerEU objectives. To this end the RRF financial envelope has been increased by EUR 20.0 billion for new grants. The RRF provides EUR 300.0 billion of funding for the REPowerEU Plan, which amounts to a great part of its funding. The 2024 EU budget, which was adopted by the Council and the European Parliament in November 2023, amounts to EUR 189.4 billion in commitment appropriations and EUR 142.6 billion in payment appropriations.

G-6

To implement the EU Recovery Instrument, the EU’s Own Resources Decision, which defines how the EU budget is financed and was adopted by the Council on December 14, 2020, pursuant to the special legislative procedure applicable thereto, was ratified by all EU Member States in accordance with their own constitutional requirements. Under the Own Resources Decision, the European Commission is authorized, on an exceptional basis, to temporarily borrow up to EUR 750 billion (in 2018 prices) on the capital markets. In June 2023, the Commission proposed to amend the Own Resources Decision to include revenues from emissions trading, resources generated via the carbon border adjustment mechanism, which aims to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries, and temporary statistical own resources based on company profits. The amended Own Resources Decision is pending approval by the Council. In 2023, the Commission raised EUR 115.9 billion via long-term EU bonds. While the proceeds from the EU bonds mainly benefited the EU Recovery Instrument, EUR 18.0 billion were used for the Macrofinancial Assistance of Ukraine. At the end of 2023, the overall outstanding amount of EU bonds reached EUR 443.0 billion, of which EUR 36.5 billion were raised through green bonds. In addition, as of December 31, 2023, EUR 15.2 billion of short-term debt in EU bills was outstanding. The European Commission has announced plans to issue long-term EU bonds in an amount of EUR 75 billion between January and June 2024, to be complemented by short-term EU bills.

Sources: European Commission, Europe in 12 lessons by Pascal Fontaine

(https://op.europa.eu/en/publication-detail/-/publication/a5ba73c6-3c6a-11e8-b5fe-01aa75ed71a1); European Banking Authority, Regulation and policy, Passporting and supervision of branches

(https://eba.europa.eu/regulation-and-policy/passporting-and-supervision-branches); European Commission, Competition Policy, State Aid

(https://competition-policy.ec.europa.eu/state-aid_en); European Commission, Competition Policy, State Aid, Coronavirus, The State Aid Temporary Framework

(https://competition-policy.ec.europa.eu/state-aid/coronavirus/temporary-framework_en); European Commission, Competition Policy, State Aid, Ukraine

(https://competition-policy.ec.europa.eu/state-aid/temporary-crisis-and-transition-framework_en); European Council, Council of the European Union, Policies, The EU’s annual budget

(https://www.consilium.europa.eu/en/policies/eu-annual-budget/); European Council, Council of the European Union, Policies, The EU long-term budget, Timeline - EU long-term budget 2021-2027

(https://www.consilium.europa.eu/en/policies/eu-long-term-budget/timeline-long-term-eu-budget-2021-2027/#:~:text=The%20budget%20will%20support%
20investment,%E2%82%AC360%20billion%20in%20loans); Official Journal of the European Union, Council Regulation (EU, Euratom) 2024/765 of 29 February 2024 amending Regulation (EU, Euratom) 2020/2093 laying down the multiannual financial framework for the years 2021 to 2027

(https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202400765); European Commission, The 2021-2027 EU budget – What’s new?

(https://commission.europa.eu/strategy-and-policy/eu-budget/long-term-eu-budget/2021-2027/whats-new_en#revision-of-the-eu-budget-2021-2027); Publications Office of the European Union, The EU’s 2021-2027 long-term budget and NextGenerationEU, Facts and Figures (https://op.europa.eu/en/publication-detail/-/publication/d3e77637-a963-11eb-9585-01aa75ed71a1/language-en); European Commission, Strategy and policy, Recovery Plan for Europe (https://commission.europa.eu/strategy-and-policy/recovery-plan-europe_en); European Council, Council Decision (EU, Euratom) 2020/2053 (https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32020D2053); European Commission, Questions and Answers: An adjusted package for the next generation of own resources (https://ec.europa.eu/commission/presscorner/detail/en/qanda_23_3329); European Commission, Recovery and Resilience Scoreboard (https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/index.html); European Commission, Business, Economy, Euro, Economic recovery, Recovery and Resilience Facility (https://commission.europa.eu/business-economy-euro/economic-recovery/recovery-and-resilience-facility_en); European Commission, Mid-Term Evaluation of the Recovery and Resilience Facility, February 2024 (https://economy-finance.ec.europa.eu/document/download/85f0c9e6-6832-4d07-abf3-2a9280ff7cc8_en?filename=ip269_en.pdf); European Council, Council of the European Union, EU recovery plan: Council adopts REPowerEU, press release of February 21, 2023

(https://www.consilium.europa.eu/en/press/press-releases/2023/02/21/eu-recovery-plan-council-adopts-repowereu/); European Council, Council of the European Union, EU budget for 2024 (https://www.consilium.europa.eu/en/policies/eu-annual-budget/2024-budget/), accessed on May 3, 2024; European Commission, REPowerEU

(https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en); Official Journal of the European Union, Definitive adoption (EU, Euratom) 2024/207 of the European Union’s annual budget for the financial year 2024 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202400207); European Council, Council of the European Union, Green light from all member states for EU recovery spending, press release of May 31, 2021

(https://www.consilium.europa.eu/en/press/press-releases/2021/05/31/green-light-from-all-member-states-for-eu-recovery-spending/); European Commission, Half-yearly report on the implementation of borrowing, debt management and related lending operations pursuant to Article 12 of Commission Implementing Decision C(2022)9700, February 22, 2024 (https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52024DC0093&qid=1710429189518).

G-7

Trade. The EU is responsible for trade matters with third-party countries. In the area of trade in goods, the EU has exclusive competence. Furthermore, the EU’s responsibilities also cover trade in services, the commercial aspects of intellectual property (such as patents), public procurement and foreign direct investment, whereas in the case of portfolio investments, investment protection and investment dispute settlement, the competence is shared between the EU and the EU Member States. In particular, the EU is responsible for negotiating and concluding international trade agreements as well as identifying trade barriers and unfair trade practices by trading partners and adopting appropriate countermeasures. Trade agreements are negotiated by the European Commission upon authorization of the Council. Once the European Commission completes negotiations, the Council and the European Parliament examine the final negotiated agreement and decide whether or not to approve it. Trade agreements regulating areas of mixed responsibility between the EU and the EU Member States can only be concluded after ratification by all EU Member States. As part of the EU’s response to Russia’s Invasion of Ukraine the EU has imposed comprehensive economic sanctions, including trade restrictions. For more information on the trade restrictions, see “Political Integration—EU Sanctions”.

Sources: European Commission, EU trade relationships by country/region, Making trade policy (https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/making-trade-policy_en); Federal Ministry for Economic Affairs and Climate Action, Trade Policy, Fostering international trade and reducing barriers (https://www.bmwk.de/Redaktion/EN/Dossier/trade-policy.html).

EU Response to the Energy Crisis. Since the fall of 2022, and significantly exacerbated by Russia’s invasion of Ukraine, Europe has been facing an unprecedented energy crisis involving hikes in energy prices and disruptions to energy supply. In response, the EU Member States implemented several measures on the national and supranational levels to ensure affordable and competitive energy for EU consumers, increase the EU’s energy security and preparedness in the event of emergencies, and strengthen the energy resilience and autonomy of EU Member States. In early 2022, the heads of the EU Member States had jointly decided to phase out the EU’s dependency on Russian fossil fuels. In this context, the European Commission initiated the REPowerEU plan discussed above under “—The EU Budget and the EU Recovery Instrument” and put in place the Temporary Crisis and Transition Framework discussed above under “—State Aid”. The joint action was successful. In December 2023, gas prices were almost nine times less compared to the peak of the crisis and the share of Russian gas imports had fallen from more than 45% to 15%. To further enhance the security of the gas supply and strengthen energy market resilience, several European emergency energy rules have been prolonged. For instance, in December 2023, the Council prolonged the emergency regulation on the security and supply of energy prices. This regulation implemented a temporary market correction mechanism, which is intended to limit episodes of extraordinarily high gas prices in the EU and reduce the impact of price hikes on EU citizens and the EU economy. It will remain in force until January 31, 2025. Furthermore, the measures adopted by the EU Member States to improve solidarity across the EU and better coordinate the joint purchasing of natural gas in the global markets have been extended until the end of 2024. The Council also extended the agreement to accelerate the deployment of renewable energy by fast-tracking the approval processes of relevant projects until mid-2025. In March 2024, the EU Member States agreed to continue reducing their gas consumption for another year on a voluntary basis. In June 2022, the Council had adopted the gas storage regulation which considers gas storage facilities as critical infrastructure that require certification and sets out intermediate targets for gas storage levels. In November 2023, the European Commission announced the gas storage targets for 2024.

Sources: European Council, Council of the European Union, Policies, Energy prices and security of supply, accessed on May 3, 2024

(https://www.consilium.europa.eu/en/policies/energy-prices-and-security-of-supply); European Council, Council of the European Union, Prolongation of emergency regulations on security of supply and energy prices: Council adopts measures, press release of December 22, 2023

(https://www.consilium.europa.eu/en/press/press-releases/2023/12/22/prolongation-of-emergency-regulations-on-security-of-supply-and-energy-prices-council-adopts-measures); European Council, Council of the European Union, Infographics, A market mechanism to limit excessive gas spikes

(https://www.consilium.europa.eu/en/infographics/a-market-mechanism-to-limit-excessive-gas-price-spikes); European Commission, Intermediate gas storage filling targets for 2024 announced, press release of November 20, 2023 (https://energy.ec.europa.eu/news/intermediate-gas-storage-filling-targets-2024-announced-2023-11-20_en).

Monetary Integration

The Federal Republic is a signatory to and has ratified the Treaty on European Union of February 1992 (also known as the “Maastricht Treaty”). The Maastricht Treaty was the basis for the establishment of the European Economic and Monetary Union (“EMU”). The EMU led, in turn, to the adoption of irrevocable conversion rates between the euro and the national currencies of the initial participating member states on December 31, 1998, and the introduction of the euro as the single European currency in the euro area on January 1, 1999. On January 1, 2002, banknotes and coins denominated in euro were introduced as legal tender to replace the national currencies in the twelve member states forming the euro area at that time (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain). Slovenia, Malta, Cyprus, Slovakia, Estonia, Latvia, Lithuania and Croatia subsequently joined the euro area.

G-8

The ECB was established on June 1, 1998, as part of the European System of Central Banks (“ESCB”). According to the Maastricht Treaty, the primary objective of the ESCB is to maintain price stability. Without prejudice to the objective of price stability, the ESCB supports the general economic policies of the EU. See “— Monetary and Financial System” for more information on the ECB and ESCB as well as on the European financial system. The Eurosystem, consisting of the ECB and the national central banks of those EU Member States whose currency is the euro (“Euro Area Member States”), assumed sole responsibility for the monetary policy in the euro area on January 1, 1999.

Sources: European Union, Principles, countries, history, Principles and values, Founding agreements, Treaty on European Union – Maastricht Treaty

(https://european-union.europa.eu/principles-countries-history/principles-and-values/founding-agreements_en); European Central Bank, About us, Our history, arts and culture, Our history, Economic and Monetary Union (EMU)

(https://www.ecb.europa.eu/ecb/history-arts-culture/history/emu/html/index.en.html); European Central Bank, The euro, Our money

(https://www.ecb.europa.eu/euro/intro/html/index.en.html); European Central Bank, Monthly Bulletin, 10th Anniversary of the ECB

(https://www.ecb.europa.eu/pub/pdf/other/10thanniversaryoftheecbmb200806en.pdf).

EU Economic Governance

The EU economic governance framework aims to detect, prevent and correct problematic economic trends such as excessive government deficits or public debt levels, which can stunt growth and put economies at risk. The framework consists of the following main components.

Stability and Growth Pact. To strengthen the monitoring and coordination of national fiscal and economic policies, the EU Member States established the Stability and Growth Pact (“SGP”) in 1997. In February 2024, the European Parliament and Council agreed to reform the economic governance rules of the SGP, based on a March 2023 proposal by the European Commission. The main objective of the new framework is to strengthen the EU Member States’ debt sustainability and promote sustainable and inclusive growth. Under the new framework, EU Member States are given a timeframe within which, through a combination of fiscal adjustment, growth-enhancing reforms and priority investments, their debt level is to be put on a downward path. The SGP reference values of 3% for the GDP budget deficit and 60% for the GDP debt level remain in force. The new rules were adopted by the Parliament on April 23, 2024 and by the Council of the EU on April 29, 2024. They came into effect with their publication in the Official Journal of the EU on April 30, 2024. During 2024, fiscal surveillance will be based on the country-specific recommendations issued in Spring 2023, in accordance with the rules of the SGP currently in effect.

The new framework requires EU Member States to set up a medium-term fiscal-structural plan for the next four years, extendable to up to seven years. The net expenditure path is intended to be the single operational indicator for the national plans. After the initial submission of the medium-term fiscal structural plans, the plans will be assessed by the European Commission and endorsed by the Council. Every April, EU Member States will be required to submit a progress report on the medium-term structural plan, which replaces the Stability and Convergence Programmes of the SGP. In addition, to ensure the coordination of fiscal policies among Euro Area Member States, governments are required by European economic governance rules to submit their draft budgetary plans for the following year to the European Commission by October 15 of each year. The European Commission will then assess whether the Members States’ draft budgetary plans are consistent with their net expenditure paths, pursuant to the new regulation.

The preventive arm of the SGP binds EU Member States to their commitments towards sound fiscal policies. In this respect the new framework introduces risk-based surveillance which differentiates between EU Member States and their fiscal situation. For EU Member States with a government deficit greater than 3% of GDP or a public debt level greater than 60% of GDP, the European Commission will issue a country-specific “reference trajectory” and a corresponding level of the structural primary balance to be reached by the end of the adjustment process. This primary structural balance target is defined as the cyclically adjusted general government balance net of temporary measures and net of interest expenditure. Quantitative safeguards are intended to ensure declining debt and to provide a safety margin below the Maastricht Treaty deficit reference value of 3% of GDP in order to create fiscal buffers. Thus, the new rules replace the 1/20 debt reduction requirement for EU Member States with a debt level above 60% of GDP.

The corrective arm of the SGP consists of the excessive deficit procedure (“EDP”). The EDP ensures the correction of excessive budget deficits (defined as a deficit greater than 3% of GDP), excessive public debt levels (defined as a debt ratio greater than 60% of GDP without an adequate diminishing trend) or excessive control account deviations (defined as deviations from the “reference trajectory” in the EU Member State’s net expenditure). EU Member States that fail to respect the SGP’s preventive or corrective rules may ultimately face sanctions. For Euro Area Member States, these could take the form of warnings and financial sanctions including fines. In addition, all EU Member States could face a suspension of commitments or payments from the EU’s structural and investment funds if they fail to abide by the corrective rules. The SGP contains rules for exceptional situations. In particular, in case of an unusual event outside the control of the EU Member State concerned, which has a major impact on the financial position of its general government, or in periods of severe economic downturn for the euro area or the EU as a whole, upon proposal of the European Commission and endorsement of the Council, EU Member States are allowed to depart from the budgetary requirements that would normally apply, provided that this does not endanger fiscal sustainability in the medium-term. When applied in the case of a severe economic downturn for the euro area or the EU as a whole, this rule is referred to as the “general escape clause.”

G-9

The “general escape clause” under the SGP was deactivated at the end of 2023, after having been activated in March 2020 to permit EU Member States to deal adequately with the effects of the COVID-19 pandemic and extended in May 2022 after Russia’s invasion of Ukraine created downside risks to economic activity. See also “—Public Finance—Germany’s General Government Deficit/Surplus and General Government Gross Debt.”

Sources: European Commission, Economy and Finance, Economic and fiscal governance (https://economy-finance.ec.europa.eu/economic-and-fiscal-governance_en); European Commission, Commission welcomes political agreement on a new economic governance framework fit for the future, press release of February 10, 2024 (https://ec.europa.eu/commission/presscorner/detail/en/ip_24_711); European Commission, Regulation of the European Parliament and the Council on the effective coordination of economic policies and the multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52023PC0240); European Commission, Vade Mecum on the Stability & Growth Pact 2019 edition, pages 25 and 44 (https://economy-finance.ec.europa.eu/system/files/2019-04/ip101_en.pdf); European Commission, Fiscal policy guidance for 2024: Promoting debt sustainability and sustainable and inclusive growth, press release of March 8, 2023 (https://ec.europa.eu/commission/presscorner/detail/%20en/ip_23_1410); European Commission, Economy and Finance, Economic and fiscal governance, Stability and Growth Pact (https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/stability-and-growth-pact_en); European Commission, Economy and Finance, Economic and fiscal governance, Stability and Growth Pact, Annual draft budgetary plans (DBPs) of euro area countries (https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/stability-and-growth-pact/annual-draft-budgetary-plans-dbps-euro-area-countries_en); European Commission, Economy and Finance, Economic and fiscal governance, Stability and Growth Pact, The preventive arm (https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/stability-and-growth-pact/preventive-arm_en); European Commission, Economy and Finance, Economic and fiscal governance, Stability and Growth Pact, The corrective arm / Excessive Deficit Procedure (https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/stability-and-growth-pact/corrective-arm-excessive-deficit-procedure_en); European Council, Council of the European Union, Statement of EU ministers of finance on the Stability and Growth Pact in light of the COVID-19 crisis, press release of March 23, 2020 (https://www.consilium.europa.eu/en/press/press-releases/2020/03/23/statement-of-eu-ministers-of-finance-on-the-stability-and-growth-pact-in-light-of-the-covid-19-crisis/); European Commission, 2022 European Semester - Spring Package, Communication from the Commission of May 23, 2022

(https://commission.europa.eu/system/files/2022-05/2022_european_semester_spring_package_communication_en.pdf); European Parliament, New EU fiscal rules approved by MEPs, press release of April 23, 2024 (https://www.europarl.europa.eu/news/en/press-room/20240419IPR20583/new-eu-fiscal-rules-approved-by-meps); European Council, Council of the European Union, Economic governance review: Council adopts reform of fical rules, press release of April 29, 2024 (https://www.consilium.europa.eu/en/press/press-releases/2024/04/29/economic-governance-review-council-adopts-reform-of-fiscal-rules/); EUR-Lex, Regulation (EU) 2024/1263 of the European Parliament and of the Council of 29 April 2024 on the effective coordination of economic policies and on multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (https://eur-lex.europa.eu/eli/reg/2024/1263/oj); EUR-Lex, Council Regulation (EU) 2024/1264 of 29 April 2024 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (https://eur-lex.europa.eu/eli/reg/2024/1264/oj); EUR-Lex, Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States (https://eur-lex.europa.eu/eli/dir/2024/1265/oj).

Macroeconomic Imbalance Procedure. Established in 2011, the macroeconomic imbalance procedure (“MIP”) is a surveillance mechanism for the EU and the EU Member States that aims to identify potential economic risks early on, prevent the emergence of harmful macroeconomic imbalances and correct any existing excessive imbalances. EU Member States’ medium-term fiscal-structural plans described above under “—Stability and Growth Pact” are required to ensure the delivery of investments and reforms to correct the imbalances identified under the MIP. The preventive arm of the procedure relies on an early warning system that uses a scoreboard of indicators and in-depth country reviews. This preventive arm allows the European Commission and the Council to provide preventive recommendations to the respective EU Member State at an early stage. In case of an EU Member State with excessive macroeconomic imbalances, the corrective arm may open an excessive imbalance procedure, under which the EU Member State concerned will have to submit a revised fiscal-structural plan and regular progress reports. The enforcement regime within the corrective arm comprises the option of imposing financial sanctions for Euro Area Member States, including fines of up to 0.1% of such Euro Area Member State’s GDP, if a Euro Area Member State repeatedly does not comply with its obligations.

In the 2023 surveillance cycle, eleven EU Member States, including Germany, were found to be experiencing imbalances or excessive imbalances. Consequently, during the 2024 surveillance cycle, these EU Member States, and additionally Slovakia will be subject to an in-depth review in the context of the MIP (see also “—Stability and Growth Pact” and “—The Economy—International Economic Relations—Germany’s Current Account Surplus and the Macroeconomic Imbalance Procedure”).

Sources: European Commission, Economy and Finance, Economic and fiscal governance, Macroeconomic Imbalance Procedure, Dealing with macroeconomic imbalances (https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/macroeconomic-imbalance-procedure/dealing-macroeconomic-imbalances_en); European Commission, Publications, 2024 European Semester: Alert Mechanism report
(https://commission.europa.eu/publications/2024-european-semester-alert-mechanism-report_en); European Commission, Regulation of the European Parliament and the Council on the effective coordination of economic policies and the multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52023PC0240).

G-10

Treaty on Stability, Coordination and Governance in the EMU. The Treaty on Stability, Coordination and Governance in the EMU (“TSCG”), which was signed in March 2012 and entered into force on January 1, 2013, is intended to promote budgetary discipline in the participating EU Member States through a fiscal pact. The fiscal pact’s provisions are binding for Euro Area Member States, while the other participating EU Member States will only be bound if they adopt the euro, unless they declare their intention to be bound by certain provisions of the treaty at an earlier date. The TSCG requires the participating parties to ensure convergence towards the country-specific, medium-term objectives as defined in the reformed SGP. In the event of significant deviations from the medium-term plan, measures should be implemented to correct the deviations over a defined period of time. The economic governance framework reform thus retains the fundamental objectives of budgetary discipline and debt sustainability set out in the TSCG (see also “—Stability and Growth Pact” ).

Sources: European Council, Fiscal compact signed: Strengthened fiscal discipline and convergence in the euro area, press release of March 2, 2012 (https://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/128454.pdf); Deutsche Bundesbank, Glossary: Treaty on Stability, Coordination and Governance in the EMU (TSCG) (https://www.bundesbank.de/dynamic/action/en/homepage/glossary/729724/glossary?firstLetter=T&contentId=653696#panel-653696); European Commission, Regulation of the European Parliament and the Council on the effective coordination of economic policies and the multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52023PC0240).

Financial Assistance in the EU

EU countries experiencing or threatened by financing difficulties can request access to several financial assistance mechanisms. The main ones are described below.

Temporary Financial Stability Mechanism. In May 2010, the EU and Euro Area Member States established a temporary stability mechanism to safeguard the financial stability amid severe tensions in euro area sovereign debt markets, consisting of the European Financial Stabilisation Mechanism (“EFSM”) and the European Financial Stability Facility (“EFSF”). Through the EFSM the European Commission is allowed to borrow up to a total of EUR 60 billion on behalf of the EU under an implicit EU budget guarantee. The EFSF was created as a temporary institution and since July 1, 2013 no longer engages in new financing programs. As of March 2024, the EFSF had outstanding loans to Ireland, Portugal and Greece of approximately EUR 170 billion. Debt securities issued by the EFSF to finance these loans are backed by irrevocable and unconditional guarantees and over-guarantees extended by the Euro Area Member States. The Federal Republic accounts for approximately 29% of the guarantees according to the contribution key. The EFSF will be dissolved and liquidated when all financial assistance provided to Euro Area Member States and all funding instruments issued by the EFSF have been repaid in full.

Sources: European Commission, Economy and Finance, EU financial assistance, How is financial assistance provided? (https://economy-finance.ec.europa.eu/eu-financial-assistance/how-financial-assistance-provided_en); European Commission, Economy and Finance, EU financial assistance, Euro area countries, European Financial Stabilisation Mechanism (EFSM) (https://economy-finance.ec.europa.eu/eu-financial-assistance/euro-area-countries/european-financial-stabilisation-mechanism-efsm_en); European Commission, Economy and Finance, EU financial assistance, Euro area countries, European Financial Stability Facility (EFSF) (https://economy-finance.ec.europa.eu/eu-financial-assistance/euro-area-countries/european-financial-stability-facility-efsf_en); European Stability Mechanism, Financial Assistance, Programme Database, Programme Overview (https://www.esm.europa.eu/financial-assistance/programme-database/programme-overview); European Financial Stability Facility, Financial Statements, Management Report and Independent Auditor’s Report 2021 (https://www.esm.europa.eu/system/files/document/2022-06/EFSF_Financial%20Statements_31.12.21.pdf); European Stability Mechanism, Explainers, Guarantees by EFSF Countries (https://www.esm.europa.eu/about-us/explainers#guarantees-by-efsf-countries).

European Stability Mechanism. Since October 2012, the European Stability Mechanism (“ESM”), which was established as an intergovernmental organization under public international law by the Euro Area Member States, has been assisting in preserving the financial stability of the EMU. As of July 1, 2013, it assumed the tasks fulfilled by the EFSF and the EFSM and is currently the primary support mechanism for Euro Area Member States experiencing or threatened by severe financing problems, if such assistance is deemed essential to safeguard financial stability in the euro area as a whole. The ESM issues bonds or other debt instruments on the financial markets to raise capital to provide assistance, subject to certain conditions, to Euro Area Member States. Unlike the EFSF, which is based upon guarantees by Euro Area Member States, the ESM has total subscribed capital of EUR 708.5 billion provided by Euro Area Member States, which provides it with a lending capacity of EUR 500 billion. EUR 81 billion of the ESM’s subscribed capital is in the form of paid-in capital with the balance of EUR 627.5 billion being callable capital. The contribution of each Euro Area Member State is based on the paid-in capital for the ECB. On this basis, the Federal Republic’s contribution amounts to approximately 27% of the aggregate contributions to the ESM. The Federal Republic contributed approximately EUR 22 billion of paid-in capital to the ESM.

G-11

Financial assistance from the ESM is activated upon a request from a Euro Area Member State to the chairperson of the ESM’s board of governors and is provided subject to strict conditions appropriate to the instrument chosen. The initial instruments available to the ESM have been modeled upon those available to the EFSF and include the extension of loans to a Euro Area Member State in financial difficulties, interventions in the primary and secondary debt markets, action based on a precautionary program, and the extension of loans to governments, or since December 2014 directly to affected financial institutions, for the purposes of recapitalizing financial institutions. Each instrument is to be linked to a memorandum of understanding which sets forth the conditions for financial support as well as the monitoring and surveillance procedures established to ensure the Euro Area Member State is progressing towards financial stability. In principle, decisions under the ESM are taken by mutual agreement. However, in the event that the European Commission and the ECB conclude that an urgent decision related to financial assistance is needed because the financial and economic sustainability of the euro area is threatened, the mutual agreement rule is replaced by a qualified majority of 85%. Given its voting rights of approximately 27%, the Federal Republic may veto any decision even under the emergency voting rule. As of March 2024, the ESM had loans in an aggregate principal amount of approximately EUR 81 billion outstanding to Spain, Cyprus and Greece.

Sources: European Stability Mechanism, Who we are, History (https://www.esm.europa.eu/about-us/history); European Commission, Economy and Finance, EU financial assistance, Euro area countries, European Stability Mechanism (ESM) (https://economy-finance.ec.europa.eu/eu-financial-assistance/euro-area-countries/european-stability-mechanism-esm_en); European Stability Mechanism, Who we are (https://www.esm.europa.eu/about-us#headline-who_we_are); European Stability Mechanism, Explainers, The ESM, Capital Structure (https://www.esm.europa.eu/about-us/explainers#capital-structure); European Stability Mechanism, Explainers, The ESM, Basic information (https://www.esm.europa.eu/about-us/explainers#basic-information); European Stability Mechanism, Financial Assistance, Financial assistance instruments, Lending toolkit

(https://www.esm.europa.eu/financial-assistance/lending-toolkit); European Stability Mechanism, Explainers, Lending, Policy conditions attached to loans (https://www.esm.europa.eu/about-us/explainers#are-policy-conditions-always-tied-to-esm-loans-); European Stability Mechanism, Explainers, The ESM, ESM decision making (https://www.esm.europa.eu/about-us/explainers#esm-decision-making); European Stability Mechanism, Financial Assistance, Programme Database, Programme Overview (https://www.esm.europa.eu/financial-assistance/programme-database/programme-overview).

On January 27 and February 8, 2021, the Euro Area Member States signed an agreement amending the treaty establishing the ESM. The reform establishes a common backstop to the Single Resolution Fund (“SRF”) in the form of a credit line from the ESM to replace the direct recapitalization instrument for financial institutions, providing a financial safety net for bank resolutions in the European banking union (the “Banking Union”), which will help to protect financial stability (see “—Monetary and Financial System—Financial System—European Financial System—European System of Financial Supervision and European Banking Union” for more information on the Banking Union and the SRF). The maximum amount of ESM loans to the SRF is set at EUR 68 billion. The credit line may only be used as a last resort and to the extent that it is fiscally neutral in the medium term, i.e., it is repaid through ex-post contributions by banks over a period of three to five years. Moreover, the revised ESM Treaty envisages the introduction of single-limb collective action clauses for bonds with maturities of more than a year issued by governments of Euro Area Member States, which, if required, would facilitate orderly and predictable sovereign debt restructuring by allowing certain cross-series modifications to the terms of bonds provided the issuer consents and there is an affirmative vote or written resolution of the holders of not less than 66²⁄₃% of the aggregate principal amount of the outstanding debt securities of all relevant series (taken in the aggregate). Furthermore, the reformed ESM Treaty enables the ESM to have a stronger role in future economic adjustment programs and crisis prevention. The reform clarified that ESM precautionary instruments provide support to Euro Area Member States with sound fundamentals that could be affected by an adverse shock beyond their control in order to safeguard the financial stability of the euro area as a whole. The eligibility criteria for granting a precautionary credit line were tightened accordingly. If a Euro Area Member State meets certain quantitative benchmarks and complies with qualitative conditions related to EU surveillance, it is eligible to request a precautionary credit line based on a letter of understanding. Access to the credit line shall be discontinued, however, if the Beneficiary Member State (“BMS”) no longer respects the eligibility criteria. If the non-compliant BMS has drawn funds from the credit line, an additional margin will be imposed. The reformed ESM Treaty will come into force once it has been ratified by the parliaments of all Euro Area Member States.

Sources: ESM, About us, ESM Reform (https://www.esm.europa.eu/about-esm/esm-reform); ESM, About ESM, ESM Treaty Reform - Explainer

(https://www.esm.europa.eu/about-esm/esm-treaty-reform-explainer#ui-id-5); European Union, Economic and Financial Committee, EFC Sub-Committee On EU Sovereign Debt Markets, Collective Action Clauses in the Euro area, “Single-limb” CAC (https://economic-financial-committee.europa.eu/efc-sub-committee-eu-sovereign-debt-markets/collective-action-clauses-euro-area_en?prefLang=de); European Union, Terms of Reference of the 2022 CAC

(https://economic-financial-committee.europa.eu/system/files/2021-04/EA%20Model%20CAC%20-%20Draft%20Terms%20of%20Reference.pdf); European Council, Council of the European Union, Infographics, Reform of the European Stability Mechanism (ESM) (https://www.consilium.europa.eu/en/infographics/reform-of-the-european-stability-mechanism-esm/); European Council, Council of the European Union, Documents & Publications, Agreement Amending the Treaty Establishing the European Stability Mechanism (ESM)

(https://www.consilium.europa.eu/en/documents-publications/treaties-agreements/agreement/?id=2019035&DocLanguage=en).

G-12

European Instrument for Temporary Support to Mitigate Unemployment Risks in an Emergency. As part of the EU’s economic policy response to the COVID-19 pandemic the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (“SURE”) was implemented by the Council of the EU in May 2020. Until the end of 2022, SURE provided for financial assistance of EUR 98.4 billion in the form of loans from the EU, underpinned by a system of voluntary guarantees by EU Member States, to 19 EU Member States. The first principal repayment is scheduled for 2025. To finance SURE, the European Commission issued several social bonds from October 2020 through December 2022 in an aggregate principal amount of EUR 98.4 billion.

Sources: European Commission, Economy and Finance, EU financial assistance, SURE
(https://economy-finance.ec.europa.eu/eu-financial-assistance/sure_en); European Commission, Economy and Finance, EU financial assistance, SURE, Evaluation of SURE
(https://economy-finance.ec.europa.eu/eu-financial-assistance/sure_en); European Commission, Report on the European instrument for Temporary Support to mitigate Unemployment Risks in an Emergency (SURE) following the COVID-19 outbreak pursuant to Article 14 of Council Regulation (EU) 2020/672 SURE after its sunset: final bi-annual report
(https://economy-finance.ec.europa.eu/document/download/f6ac72fb-92cb-40a9-bde8-0895ed341257_en?filename=COM_2023_291_1_en.pdf).

Statistical Standards

Statistical Standard for the National Accounts

Since August 2014, the Federal Statistical Office has been calculating the German national accounts in accordance with the European System of National and Regional Accounts 2010 (ESA 2010) which, in turn, is based on the System of National Accounts (SNA 2008) of the United Nations. In 2024, a major revision of the National Accounts that is harmonized Europe-wide will take place in Germany. The main purpose of the revision is to refine results by introducing new data sources, a new classification of private consumption expenditure and new calculation methods. The entire national accounting system will be reviewed and revised and, if necessary, new findings will be integrated into the calculations. To avoid breaks in time series, the results for Germany will be recalculated from 1991 onwards. The revised results will be published for the first time in summer 2024.

Sources: Statistisches Bundesamt, National Accounts, ESA 2010 methods and sources for the German GNI and its components, published on April 6, 2022
(https://www.destatis.de/EN/Themes/Economy/National-Accounts-Domestic-Product/Publications/Downloads-National-Accounts-Domestic-Product/esa-2010-methods.pdf?__ blob=publicationFile); Statistisches Bundesamt, National accounts, domestic product, Major Revision of National Accounts 2024
(https://www.destatis.de/EN/Themes/Economy/National-Accounts-Domestic-Product/InfoRevision2024.html).

Statistical Standard for the Balance of Payments

Since July 2014, the methodological concept of the German balance of payments statistics follows the sixth edition of the Balance of Payments and International Investment Position Manual (“BPM6”), the revised standard of the IMF. The application of BPM6 is binding for EU Member States by virtue of a regulation adopted by the European Commission. Balance of payments data since 1971 have been recalculated in accordance with BPM6.

Source: Bundesbank, Statistics, External Sector, Balance of Payments, Methodological notes (https://www.bundesbank.de/en/statistics/external-sector/balance-of-payments/methodological-notes-794532).

G-13

Statistical Disclosure Standards of the International Monetary Fund

Since February 2015, the Federal Republic meets the Special Data Dissemination Standard Plus (“SDDS Plus”) of the IMF relating to coverage, periodicity and timeliness of economic data. The SDDS Plus was created in 2012 as an extension of the existing Special Data Dissemination Standard. By providing comparable economic and financial data, it is designed to improve the transparency of the financial sector and its international interdependencies, and thus contributes to the identification of risks at an early stage. Although adherence by member countries to the SDDS Plus is voluntary, it carries a commitment requiring members to observe the standard and to provide certain information to the IMF about their practices in disseminating economic and financial data.

Source: Bundesbank, Statistics, Set of indicators, SDDS Plus (Special Data Dissemination Standard) (https://www.bundesbank.de/en/statistics/sets-of-indicators/sdds-plus/sdds-plus-795798).

G-14

THE ECONOMY

Overview

Since 1945, the Federal Republic’s economic system has developed into a social market economy, combining the free initiative of the individual with progressive social principles. The Grundgesetz guarantees freedom of private enterprise and private property, provided that these basic rights are not exercised against the public good. The state mainly has a regulatory function in the market economy, setting the general framework of conditions within which market processes take place.

Key Economic Figures

The German economy is one of the world’s largest economies, with an annual GDP of EUR 4,121.2 billion in 2023. After the COVID-19 pandemic-induced recession, price-adjusted GDP increased by 3.2% in 2021 and by 1.8% in 2022. Thus, the German economy managed to recover from the sharp decline experienced during the first year of the COVID-19 pandemic and price-adjusted GDP in 2022 was 1.0% higher than in 2019, the year before the start of the COVID-19 pandemic. In 2023, price-adjusted GDP decreased by 0.3% against the backdrop of Russia’s invasion of Ukraine. Compared to the level of 1991, which represents the first full year after German reunification on October 3, 1990, price-adjusted GDP increased by 47.1%. Productivity gains contributed to the growth in price-adjusted GDP since 1991, given that price-adjusted GDP per employee has risen by 24.5% since 1991. In calculating price-adjusted GDP, the Federal Statistical Office (Statistisches Bundesamt) uses a chain index based on the previous year’s prices. In 2023, the GDP per capita at current prices was EUR 48,750 while the GDP per person employed at current prices was EUR 89,721.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Tables 1.1 and 1.4.

As in many advanced economies, the services sector of the Federal Republic has become the largest contributor to GDP (in terms of gross value added). In 2023, services accounted for 68.5% of gross value added, measured at current prices, compared to 61.9% in 1991. The two most important subsectors were “trade, transport, accommodation and food services,” accounting for 16.4% in 2023, compared to 16.1% in 1991, and “public services, education, health,” accounting for 18.5% of gross value added in 2023, compared to 15.9% in 1991. The production sector (excluding construction) generated 24.5% of gross value added compared to 30.8% in 1991. Construction contributed 6.2% to gross value added in 2023, compared to 6.0% in 1991, and agriculture, forestry and fishing accounted for 0.8% of gross value added in 2023, compared to 1.2% in 1991.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Table 2.1.

In 2023, private final consumption expenditure totaled 50.7%, gross capital formation amounted to 23.6% and government final consumption expenditure equaled 21.6%, in each case of GDP at current prices. Exports and imports of goods and services accounted for 47.1% and 43.0% of GDP at current prices, respectively. In 2022, Germany’s trade surplus decreased substantially because of the deterioration of terms of trade as a result of Russia’s invasion of Ukraine. In 2023, the trade surplus rebounded substantially and was almost as high as in 2021. In 2023, the trade balance (according to national accounts) showed a surplus equal to 4.2% of GDP (2022: 2.0% of GDP).

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Table 3.1.

In the spring of 2022, virtually all COVID-19 protection measures were lifted. This contributed to the recovery of the German economy. However, Russia’s invasion of Ukraine at the end of February 2022 and the subsequent extreme rise in energy prices and its knock-on effects on consumer price inflation have dampened economic activity in Germany. In 2023, annual price-adjusted GDP was 0.3% lower than in 2022 and GDP adjusted for both price and calendar effects decreased by 0.1%. Household final consumption expenditure decreased by a price-adjusted 0.8% year on year. Exports decreased by 2.2%, while imports decreased by 3.4%, all on a price-adjusted basis. Accordingly, the growth contribution of net exports was 0.6 percentage points. Gross fixed capital formation decreased by 0.7%, in price-adjusted terms. Government final consumption expenditure decreased by 1.5% on a price-adjusted basis as measures related to the COVID-19 pandemic expired.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Tables 1.1, 3.2, 3.5 and 3.17.

G-15

The annual average rate of registered unemployment (as computed under the “national definition” of the Federal Employment Agency (Bundesagentur für Arbeit)) increased from 5.3% in 2022 to 5.7% in 2023. Based on the internationally comparable method of calculation promulgated by the International Labour Organization (“ILO”), which is referred to as the “ILO definition,” the annual average unemployment rate decreased from 2.9% in 2022 to 2.8% in 2023. For an explanation of the differences between the national definition and the ILO definition, see “—Employment and Labor.” Inflation as measured by the percentage change in the national consumer price index (“CPI”) decreased to 5.9% in 2023, compared to 6.9% in 2022. General government gross debt stood at EUR 2,622.7 billion at year-end 2023, compared to EUR 2,561.7 billion at year-end 2022.

Sources: Bundesagentur für Arbeit, Statistik, Monatsbericht zum Arbeits- und Ausbildungsmarkt: Dezember und Jahr 2023, Table 9. Eckwerte des Arbeitsmarktes – Jahreszahlen
(https://statistik.arbeitsagentur.de/Statistikdaten/Detail/202312/arbeitsmarktberichte/monatsbericht-monatsbericht/monatsbericht-d-0-202312-pdf.pdf?__blob=publicationFile&v=1); Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 2023 (February 2024), Table 1.11; Statistisches Bundesamt, Statistischer Bericht, Verbraucherpreisindes für Deutschland - Lange Reihen ab 1948 - Januar 2024, Table 611xx-02; Deutsche Bundesbank, Statistics, Time series databases, Time series BBK01.BJ9059: General government debt as defined in the Maastricht Treaty — Germany — overall
(https://www.bundesbank.de/dynamic/action/en/statistics/time-series-databases/time-series-databases/745582/745582?listId=www_v27_web011_21a&tsId=BBK01.BJ9059).

The following table shows selected key economic figures for the Federal Republic for each of the years indicated.

KEY ECONOMIC FIGURES

	2023		2022		2021		2020		2019
	(EUR in billions, unless otherwise indicated)
GDP - at current prices		4,121.2		3,876.8		3,617.5		3,403.7		3,473.1
(change from previous year in %)		6.3		7.2		6.3		-2.0		3.2
GDP - price-adjusted, chain-linked index (2015=100), not adjusted for calendar effects		107.9		108.2		106.3		103.0		107.1
(change from previous year in %)		-0.3		1.8		3.2		-3.8		1.1
GDP - price-adjusted, chain-linked index (2015=100), adjusted for calendar effects		107.9		108.0		106.0		102.8		107.3
(change from previous year in %)		-0.1		1.9		3.1		-4.2		1.1
Unemployment rate (ILO definition) (in %) (1)		2.8		2.9		3.3		3.3		2.8
Inflation (year-to-year change in the consumer price index (CPI) in %)		5.9		6.9		3.1		0.5		1.4
Balance of payments - current account		243.1		164.6		263.5		222.5		283.8
General government gross debt (2)		2,622.7		2,561.7		2,495.5		2,340.8		2,069.9

(1) Unemployed persons, available and seeking work.

(2) Definition according to Maastricht Treaty.

Sources: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Tables 1.1 and 1.11; Statistisches Bundesamt, Consumer price indices, Consumer price index - overall index and by 12 divisions, Change on previous year

(https://www.destatis.de/EN/Themes/Economy/Prices/Consumer-Price-Index/Tables/Consumer-prices-12-divisions.html#242118); Deutsche Bundesbank, Balance of payments statistics 11-04-2024, Table I. Major items of the balance of payments

(https://www.bundesbank.de/resource/blob/810958/84f5a1f1ba0be67eb64435fc07098b7f/mL/i-wichtige-posten-data.pdf); Deutsche Bundesbank, Statistics, Time series databases, Time series BBK01.BJ9059: General government debt as defined in the Maastricht Treaty - Germany - overall

(https://www.bundesbank.de/dynamic/action/en/statistics/time-series-databases/time-series-databases/745582/745582?tsId=BBK01.BJ9059&listId=www_v27_web001_02a&dateSelect=2023).

Economic Outlook

The German economy has proven resilient to the steep energy price increases following Russia’s invasion of Ukraine and the cut of pipeline gas supply from Russia. Nevertheless, high inflation rates, the subsequent sharp rise in interest rates, weak foreign demand and an unusually high level of sick leaves of employees had a dampening effect on economic growth, with price-adjusted GDP falling by 0.3% in 2023.

In the Spring Forecast published on April 24, 2024, the Federal Government projects that the German economy will gradually recover and gain some momentum over the course of 2024 as a result of lower inflation, lower interest rates, rising wages, a robust labor market and an increase in foreign demand. Overall, price-adjusted GDP is expected to increase by 0.3% in 2024 and by 1.0% in 2025.

G-16

Private consumption is expected to be the main growth driver in 2024, rising by 0.9% (2025: +1.0%). Significantly higher real wages, combined with sustained employment growth, are expected to increasingly offset the inflationary squeeze of households’ purchasing power. Given high financing costs and slack in capacity utilization, gross fixed capital formation will only gradually pick up over the course of 2024 and 2025, with a projected decline in 2024 due to a negative statistical carry-over effect (2024: -0.8%; 2025: +1.7%). The construction sector is particularly affected by markedly higher interest rates for real estate loans and higher prices for building materials. Foreign trade is projected to remain subdued in the early stages of the expected recovery, partly due to the lingering effects of global monetary tightening and geopolitical tensions. Nevertheless, global trade is expected to pick up over the course of 2024, which should also benefit German exporters. Due to a negative statistical carry-over effect from 2023, however, exports are expected to decline in 2024, followed by a significant recovery in 2025 (2024: -0.6%, 2025: +3.1%). Imports are projected to follow a similar pattern (2024: -0.6%, 2025: +3.6%). In 2024 and 2025, the current account balance is expected to be close to its level before the energy crisis in 2022 (7.1% and 6.9% of GDP, respectively).

The inflation rate, as measured by the percentage change of the national consumer price index compared to the pervious year, is expected to average 2.4% in 2024, a significant decrease compared to 2023 (+5.9%). This is due to the decline in energy and food price inflation, while core inflation, i.e., consumer price inflation excluding energy and food, is expected to remain elevated. Some volatility is expected in the course of 2024 due to one-off and base effects (such as the expiry of the temporary VAT rate reduction on gas and district heating at the end of March 2024 and the introduction of the Germany ticket in May 2023). For 2025, an annual average inflation rate of 1.8% is expected.

The labor market has fared robustly against the background of weak economic growth. Along with the gradual economic recovery, employment is projected to continue growing, albeit at declining rates due to demographic factors (2024: +0.4%, 2025: +0.1%), while the unemployment rate is expected to decline gradually (annual average unemployment rate according to the ILO definition in 2024: 3.0 %; 2025: 2.8 %).

Source: Bundesministerium für Wirtschaft und Klimaschutz, Frühjahrsprojektion 2024, April 24, 2024

(https://www.bmwk.de/Redaktion/DE/Artikel/Wirtschaft/Projektionen-der-Bundesregierung/projektionen-der-bundesregierung-fruehjahrsprojektion-2024.html).

General Economic Policy

The Federal Government is focusing on a wide range of supply-side policy measures to strengthen the competitiveness, resilience, and growth potential of the German economy. All policies aim for a transformation towards carbon-neutral prosperity and the preservation of biodiversity.

The Federal Government is pursuing the implementation of targeted tax incentives for private investment as a means of boosting investment via the proposed Growth Opportunities Act. Meanwhile, the Federal Government’s Climate and Transformation Fund (Klima- und Transformationsfonds) is being used to accelerate the green transformation, strengthen growth potential in the long term and promote investment in climate protection, the energy transition, mobility and digitalization.

The Federal Government is committed to reducing unnecessary bureaucracy and significantly shortening approval procedures, for instance, via the proposed Bureaucracy Reduction Act IV (Bürokratieentlastungsgesetz IV), among other measures. In order to improve the investment environment, the federal and state governments are also working together on the digitalization of administration and on the implementation of more efficient planning and approval procedures, as set forth in the Pact for Germany (Deutschland-Pakt).

The ability to innovate is key for the future competitiveness and resilience of the German economy. The Federal Government therefore intends to support companies’ research and development activities by further improving the relevant tax allowance. At the same time, the Federal Government seeks to promote the digitalization of businesses, govnerment administration and general society. For instance, through its Gigabit Strategy, the Federal Government is supporting comprehensive interconnectivity by implementing broadband fiber optics and up-to-date mobile-communication standards.

G-17

Russia’s invasion of Ukraine has underscored the need for the EU and its Member States to adjust their economic and financial policies to current geopolitical developments and to prevent risks arising from economic dependencies. The Federal Government, together with other Member States, has been working for years to strengthen EU-wide technological sovereignty. For example, several important projects in the common European interest have been launched to strengthen individual key technologies. Within the framework of the European Chips Act, the Federal Government is laying an important foundation for expanding research and development, as well as production capacities, in semiconductor technologies within Germany. In view of the need to strengthen the resilience of the German and European economies, particularly through the diversification of supply chains, the Federal Government is also setting new priorities in its trade policy; for instance, with respect to efforts to reform the WTO, the entry into, or negotiation of, EU trade agreements with high socio-ecological standards, or via investment protection. In this context, the Federal Government, for example, considers successful EU treaty negotiations with the MERCOSUR states, India, Indonesia, Thailand, Mexico and Australia, to be essential.

As part of its Skilled Strategy, the Federal Government is implementing new measures to increase the supply of labor by making Germany more attractive to qualified workers from abroad. To make greater use of its domestic potential, the Federal Government’s activities aim to employ currently unemployed persons and improve employment incentives and opportunities, particularly for older people and second earners.

In order to promote an efficient allocation of capital and trigger investment, the capital markets should be deepened and financing conditions improved. To this end, the Federal Government supports the creation of an EU Capital Markets Union. Moreover, the Federal Government is looking to increase the attractiveness of Germany as an investment location for innovative founders and start-ups with the implementation of the Future Financing Act (Zukunftsfinanzierungsgesetz), which aims to improve financing conditions and contribute to the further development of company law.

Recognizing climate protection as a fundamental global challenge, Germany was among the 197 states at the World Climate Conference in Paris in 2015 committed to limiting global warming to well below 2°C, preferably to 1.5°C, and to achieving greenhouse gas neutrality worldwide by the second half of the century. At the national level, the Federal Climate Protection Act (Bundes-Klimaschutzgesetz, “KSG”) provides the central legal framework for climate protection policy in Germany. In terms of greenhouse gas reduction targets, the KSG prescribes a reduction target of at least 65% for 2030 compared to 1990 levels, an interim reduction target of at least 88% for 2040 and greenhouse gas neutrality by 2045; after 2050, negative emissions are to be achieved across all sectors. To this end, the Federal Government has adopted a climate protection program for the period until 2030. The program provides for measures in all sectors and consists of four elements: a more comprehensive pricing of CO₂, support programs and further incentives for CO₂ savings, relief for citizens and the economy, and regulatory measures that will demonstrate their effectiveness by 2030 at the latest. In 2023, the Federal Government reduced hurdles for the expansion of renewable energies and the necessary grid infrastructure through amendments to the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz), the Wind Energy at Sea Act (Windenergie-auf-See-Gesetz) and the Energy Industry Act (Energiewirtschaftsgesetz) as well as through the adoption of the Wind on Land Act (Wind-an-Land-Gesetz). Together with Solar Package I, a draft law seeking to expand photovoltaic energy generation, these legislative measures are expected to strengthen the decentralized participation of private households and companies in the energy transition. In addition to expanding the energy supply, the Federal Government regards increasing energy efficiency and adapting the design of the electricity market as crucial for a successful energy transition. In view of the high electricity costs in the short- and medium-term, the Federal Government has introduced relief measures for manufacturing companies within the Electricity Price Package (Strompreispaket). Moreover, the Federal Government is helping to accelerate modernization processes in energy intensive sectors by reducing economic uncertainties through supplementary measures, such as carbon contracts for difference (Klimaschutzverträge), i.e., contracts that aim to compensate companies in energy-intensive industries for additional cost arising in connection with climate-friendly projects compared to conventional processes, or financial support for specific projects, e.g. for the production and use of hydrogen.

Sufficient and affordable housing contributes significantly to quality of life and represents an important prerequisite for economic growth, being necessary to attract skilled workers and create innovation hubs. Against this background, the Federal Government is promoting the construction of housing, for example through the Alliance for Affordable Housing (Bündnis für bezahlbares Wohnen), while promoting the decarbonization of the building sector, even under difficult macroeconomic conditions, such as the sharp rise in interest rates. Due to the particularly tense situation in the construction sector, the Federal Government has also presented a comprehensive package of measures for investment in the construction of affordable and climate-friendly housing and for the economic stabilization of the construction and real estate industries, including the provision of tax incentives and targeted funding programmes.

G-18

An efficient transport infrastructure ensures Germany’s competitiveness as a business location, contributing to the productivity of the economy. At the same time, transport plays an important role in the transformation towards greenhouse gas neutrality. The Federal Government is increasing its funding for the modernization of sustainable federal transport routes, with a particular focus on the rail network. With the Transport Authorisation Procedures Acceleration Act (Gesetz zur Beschleunigung von Genehmigungsverfahren im Verkehrsbereich), an important step was taken towards accelerating the implementation of infrastructure projects in the transport sector.

Economic policy is accompanied by a fiscal policy geared towards sustainability goals. After several years spent in crisis mode, in 2024 federal fiscal policy will once again be subject to the usual upper limit for net borrowing, i.e., the German “debt brake” (Schuldenbremse). While there is a cyclical component to the debt brake, the basic credit ceiling ensures that the debt ratio, which has risen during the exceptional crisis situations of recent years, is once again reduced with a view to rebuilding risk buffers for future crises and guaranteeing the Federal Government’s ability to act in such cases.

For further information on the Federal Republic’s fiscal situation and prospects, see “—Public Finance—Germany’s General Government Deficit/Surplus and General Government Gross Debt” and “—Public Finance—Fiscal Outlook.” For information on government measures to stabilize Germany’s financial system, see “—Monetary and Financial System—Financial System—German Financial System.” For information on government budgets, see “—Public Finance.”

Sources: Bundesministerium für Wirtschaft und Klimaschutz, Jahreswirtschaftsbericht 2022

(https://www.bmwk.de/Redaktion/DE/Publikationen/Wirtschaft/jahreswirtschaftsbericht-2022.pdf?__blob=publicationFile&v=18); Bundesministerium für Wirtschaft und Klimaschutz, Jahreswirtschaftsbericht 2023

(https://www.bmwk.de/Redaktion/DE/Publikationen/Wirtschaft/jahreswirtschaftsbericht-2023.pdf?__blob=publicationFile&v=10); Bundesministerium für Wirtschaft und Klimaschutz, Jahreswirtschaftsbericht 2024

(https://www.bmwk.de/Redaktion/DE/Publikationen/Wirtschaft/jahreswirtschaftsbericht-2024.pdf?__blob=publicationFile&v=10).

Gross Domestic Product

The following tables show the structure of the Federal Republic’s GDP at current prices by use and origin for each of the years indicated along with changes over the respective preceding period.

STRUCTUREOF GDP — USE

	2023		2022		2021		2020		2019		2023		2022		2021		2020
	(EUR in billions)										(change in %)
Domestic uses		3,949.6		3,800.5		3,422.2		3,206.1		3,267.9		3.9		11.1		6.7		-1.9
Final private consumption		2,089.7		1,979.3		1,785.5		1,708.7		1,804.5		5.6		10.9		4.5		-5.3
Final government consumption		888.5		850.9		796.8		749.6		703.5		4.4		6.8		6.3		6.6
Gross fixed capital formation		904.2		856.2		770.5		733.2		740.5		5.6		11.1		5.1		-1.0
Machinery and equipment		275.5		253.4		227.5		217.1		241.2		8.7		11.4		4.8		-10.0
Construction		486.8		463.5		406.5		384.6		363.1		5.0		14.0		5.7		5.9
Other products		141.9		139.3		136.5		131.4		136.3		1.9		2.1		3.8		-3.5
Changes in inventories (1)		67.2		114.1		69.4		14.6		19.2		—		—		—		—
Net exports (1)		171.5		76.3		195.3		197.6		206.3		—		—		—		—
Exports		1,942.5		1,974.2		1,710.3		1,479.8		1,637.3		-1.6		15.4		15.6		-9.6
Imports		1,771.0		1,897.9		1,515.0		1,282.2		1,431.0		-6.7		25.3		18.2		-10.4
Gross domestic product		4,121.2		3,876.8		3,617.5		3,403.7		3,474.1		6.3		7.2		6.3		-2.0

(1) Percentage changes are not presented due to the potentially changing signs of these net positions.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Tables 3.1 and 3.9.

G-19

STRUCTURE OF GDP — ORIGIN

	2023		2022		2021		2020		2019		2023		2022		2021		2020
	(EUR in billions)										(change in %)
Gross value added of all economic sectors		3,765.8		3,509.6		3,276.4		3,086.4		3,130.6		7.3		7.1		6.2		-1.4
Agriculture, forestry and fishing		29.8		35.7		25.8		25.2		27.5		-16.4		38.5		2.4		-8.5
Production sector (excluding construction)		923.5		841.8		806.0		740.9		783.0		9.7		4.4		8.8		-5.4
Construction		233.8		201.1		171.9		168.1		154.7		16.3		17.0		2.3		8.7
Trade, transport, accommodation, and food services		616.0		591.8		515.0		481.0		502.6		4.1		14.9		7.1		-4.3
Information and communication		189.5		176.2		167.5		154.2		152.3		7.5		5.2		8.6		1.3
Financial and insurance services		143.3		139.0		138.6		125.2		121.7		3.1		0.3		10.7		2.9
Real estate activities		375.7		343.9		336.5		329.1		325.1		9.3		2.2		2.2		1.2
Business services		428.5		400.9		374.9		348.9		359.3		6.9		6.9		7.5		-2.9
Public services, education, health		695.2		657.5		628.3		603.9		583.8		5.7		4.6		4.0		3.4
Other services		130.4		121.7		111.8		110.0		120.7		7.1		8.9		1.6		-8.9
Taxes on products offset against subsidies on products		355.4		367.2		341.1		317.4		343.5		-3.2		7.7		7.5		-7.6
Gross domestic product		4,121.2		3,876.8		3,617.5		3,403.7		3,474.1		6.3		7.2		6.3		-2.0

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Tables 1.14 and 2.1.

Sectors of the Economy

Production Sector

Following German reunification in 1990, industry in the eastern Länder (i.e., the territory of the former German Democratic Republic), has undergone a restructuring process. Today, the German production sector is characterized by a balanced mix of small, medium and large enterprises, and is almost entirely privately owned. Measured by its share in value added, approximately 58% of the production sector is geographically concentrated in the western Länder of Bavaria, Baden-Württemberg and North Rhine-Westphalia. The main segments of the production sector relate to the manufacturing of motor vehicles, machinery and equipment, electrical and optical equipment, basic metals and fabricated metal products, as well as chemicals and chemical products. In 2023, the production sector’s aggregate contribution to gross value added at current prices was 24.5% (excluding construction) and 30.7% (including construction), respectively. Its price-adjusted gross value added (excluding construction) decreased by 1.8% year-on-year in 2023.

Sources: Volkswirtschaftliche Gesamtrechnungen der Länder, Reihe 1, Länderergebnisse Band 1 (March 2024), Table 2.3; Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Tables 2.1 and 2.2.

G-20

OUTPUTINTHE PRODUCTION SECTOR (1)

(2021 = 100)

	2023		2022		2021		2020
Production sector, total		96.8		98.4		99.3		95.9
Industry (2)		98.4		98.8		99.3		94.8
of which:
Intermediate goods (3)		90.6		95.6		99.4		91.9
Capital goods (4)		105.8		100.7		99.2		96.7
Durable goods (5)		94.6		101.3		99.2		93.5
Nondurable goods (6)		95.6		100.0		99.4		97.5
Energy (7)		85.2		98.7		99.9		96.9
Construction (8)		95.6		96.7		99.1		101.4

(1) Adjusted for working-day variations.

(2) Manufacturing sector, unless assigned to the main grouping energy, plus mining and quarrying.

(3) Including mining and quarrying except energy-producing goods.

(4) Including manufacture of motor vehicles and components.

(5) Consumption goods that have a long-term use, such as furniture.

(6) Consumption goods that have a short-term use, such as food. Including printing and service activities related to printing.

(7) Electricity, gas, steam and hot water supply, mining and quarrying of energy-producing materials, and especially manufacture of refined petroleum products.

(8) Comprises the economic classifications “Site preparation” and “Building of complete constructions or parts thereof; civil engineering.”

Source: Deutsche Bundesbank, Monatsbericht März 2024, Table XI.2.

Services Sector

As in most other industrialized countries, the services sector, which comprises “trade, transport, accommodation and food services,” “information and communication,” “financial and insurance services,” “real estate activities,” “business services,” “public services, education, health” as well as “other services,” has expanded rapidly in recent years and is currently the largest contributor to gross value added. In 2023, the services sector’s aggregate contribution to gross value added at current prices was 68.5%, compared to 61.9% in 1991. Within the services sector, “public services, education, health” represented the largest subsector in terms of contribution to total gross value added at current prices, contributing 18.5% in 2022 after 15.9% in 1991.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 2023 (February 2024), Table 2.1.

Employment and Labor

Although economic output decreased in 2023, labor market conditions hardly deteriorated. In 2023, the average unemployment rate according to the national definition was 5.7%, compared to 5.3% in 2022. Under the ILO definition, the average unemployment rate was 2.8% in 2023 compared to 2.9% in 2022. The number of persons resident in Germany who were either employed or self-employed was 45.8 million in 2023 compared to 45.5 million in 2022.

Sources: Bundesagentur für Arbeit, Statistik, Monatsbericht zum Arbeits- und Ausbildungsmarkt: Dezember und Jahr 2023, Table 9. Eckwerte des Arbeitsmarktes – Jahreszahlen (https://statistik.arbeitsagentur.de/Statistikdaten/Detail/202312/arbeitsmarktberichte/monatsbericht-monatsbericht/monatsbericht-d-0-202312-pdf.pdf?__blob=publicationFile&v=1); Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 2023 (February 2024), Table 1.11.

G-21

The following table presents data with respect to employment and unemployment for each of the years indicated. The ILO definition and the national definition of unemployment differ in various ways. Further, the national definition of unemployment is applied to administrative data whereas unemployment according to the ILO is measured using surveys.

EMPLOYMENTAND UNEMPLOYMENT

	2023		2022		2021		2020		2019
Employed (in thousands)–ILO definition		45,784		45,457		44,868		44,818		45,133
Unemployed (in thousands)–ILO definition (1)		1,334		1,343		1,536		1,551		1,280
Unemployment rate (in %)–ILO definition		2.8		2.9		3.3		3.3		2.8
Unemployed (in thousands)–national definition (2)		2,609		2,418		2,613		2,695		2,267
Unemployment rate (in %)–national definition (3)		5.7		5.3		5.7		5.9		5.0

(1) Unemployed persons, available and seeking work.

(2) Registered unemployed persons, available and seeking work (but including persons working up to 15 hours per week).

(3) As a percentage of the total work force (excluding armed forces).

Sources: Bundesagentur für Arbeit, Statistik, Monatsbericht zum Arbeits- und Ausbildungsmarkt: Dezember und das Jahr 2023, Table 9. Eckwerte des Arbeitsmarktes – Jahreszahlen (https://statistik.arbeitsagentur.de/Statistikdaten/Detail/202312/arbeitsmarktberichte/monatsbericht-monatsbericht/monatsbericht-d-0-202312-pdf.pdf?__blob=publicationFile&v=1); Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Table 1.11.

The following table presents data with respect to the employment rate broken down by gender and age for 2023.

EMPLOYMENT RATE – BREAKDOWNBY GENDERAND AGE

	2023
(Age in years)	Total		Men		Women
15 to 19		28.1		29.5		26.6
20 to 24		70.2		72.2		68.1
25 to 29		82.3		85.5		78.8
30 to 34		84.3		89.9		78.4
35 to 39		84.8		90.4		79.0
40 to 44		86.6		91.0		82.2
45 to 49		87.4		90.3		84.5
50 to 54		86.5		89.6		83.5
55 to 59		83.1		86.7		79.6
60 to 64		65.4		69.4		61.5
65 to 69		20.2		23.9		16.8
15 to 64		77.2		80.8		73.6
65 and older		9.0		11.8		6.7
Total		60.0		65.0		55.2

Source: Statistisches Bundesamt, Erwerbsbeteiligung, Erwerbstätige und Erwerbstätigenquote nach Geschlecht und Alter, Ergebnis des Mikrozensus 2023 (https://www.destatis.de/DE/Themen/Arbeit/Arbeitsmarkt/Erwerbstaetigkeit/Tabellen/erwerbstaetige-erwerbstaetigenquote.html).

The following table presents data with respect to the structure of employment by economic sector for 2023 and 2013.

STRUCTUREOF EMPLOYMENT – ECONOMIC SECTORS

	2023		2013
	(Percent of total)
Agriculture, forestry and fishing		1.2		1.5
Production sector (excluding construction)		17.7		18.9
of which: manufacturing		16.3		17.6
Construction		5.8		5.7
Trade, transport, accommodation and food services		22.1		23.0
Information and communication		3.4		2.9
Financial and insurance services		2.3		2.8
Real estate activities		1.0		1.1
Business services		13.7		13.2
Public services, education, health		26.2		23.9
Other services		6.5		7.0
Total (1)		100.0		100.0

(1) Figures may not add up due to rounding.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2023 (March 2024), Table 2.2.9.

G-22

The following table shows changes in the annual wage level per employee and unit labor costs per hour worked for each of the years indicated.

WAGE TRENDSAND LABOR COSTS

	2023		2022		2021		2020		2019
Gross wages and salaries per employee in EUR		42,213		39,777		38,198		36,972		37,012
Change from previous year in %		6.1		4.1		3.3		-0.1		3.0
Unit labor costs per hour worked Index (2015=100)		123.5		115.7		111.9		111.8		108.6
Change from previous year in %		6.7		3.5		0.0		3.0		3.1

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Tables 2.17 and 2.20.

About one-sixth of the German work force consists of members of unions. The German Trade Union Federation (Deutscher Gewerkschaftsbund) serves as an umbrella organization for eight such unions. In 2023, approximately 5.7 million persons were members of a union under the umbrella of the German Trade Union Federation, which is considerably less compared to the 11.8 million members in 1991, the first full year after German reunification. One major reason contributing to the strong decline since 1991 is the significant decline in manufacturing employment in the eastern Länder after reunification.

Each member union typically covers employees of an entire industry, regardless of the precise type of work done by those employees (the “one union, one industry” principle). As a result, employers usually deal with only one negotiating partner on the labor side in each specific industry. The unions and employers of each specific industry enter into collective labor agreements (Tarifverträge) without government intervention. The collective labor agreements often apply to all employees of a given industry, regardless of whether or not a particular employee is a member of a union, so long as the employer is a member of the relevant association of employers, which is often the case. Despite their binding character, collective labor agreements in many cases contain opt-out clauses (Öffnungsklauseln) allowing for company-specific adjustments to be negotiated between the employer and the works council at the specific company. Moreover, there is a range of additional possibilities to deviate from these agreements. Many employers in the eastern Länder are not members of employers’ associations, which means that wages are individually negotiated, often resulting in wage levels that are lower than those provided for by the collective labor agreements.

Sources: Deutscher Gewerkschaftsbund, Broschüre und Flyer, Mitglieder in den DGB-Gewerkschaften 1951 bis 2018 (https://www.dgb.de/fileadmin/download_center/Brosch%C3%BCren_und_Flyer/Mitglieder-in-den-dgb-gewerkschaften-1951-bis-2018-rgb.pdf); European Trade Union Institute, National Industrial Relations, Countries, Germany, Trade Unions (https://www.worker-participation.eu/National-Industrial-Relations/Countries/Germany); Bundeszentrale für politische Bildung, kurz&knapp, Lexika, Handwörterbuch des politischen Systems, Tarifpolitik/Tarifautonomie

(https://www.bpb.de/kurz-knapp/lexika/handwoerterbuch-politisches-system/202193/tarifpolitik-tarifautonomie/).

Social Security, Social Protection, and Social Policy

The comprehensive system of social security and protection in effect in the Federal Republic includes in particular health insurance, long-term care insurance, retirement and disability pensions, participation benefits and benefits for medical rehabilitation, protection against the effects of occupational accidents and diseases by means of the mandatory occupational accident insurance, unemployment benefits, compensation for workers in short-time work schemes (Kurzarbeit), family benefits, benefits and rehabilitation for persons with disabilities, allowances to orphans and to single persons with dependents, and the provision of general public assistance to persons in need. The majority of the German population is covered by mandatory statutory pensions and health insurance. Hospitals and institutions caring for children and handicapped persons are operated by municipalities, churches, charitable institutions, and private providers.

Most of these social services are mainly funded through social security contributions from employers and employees, and a smaller part is funded through direct contributions by the Federal Republic, the Länder, municipalities and other public institutions, depending notably upon whether the respective social service is provided by an insurance-based system funded through contributions or a social-assistance-like program funded through taxes.

G-23

The Federal Republic’s statutory pension insurance system operates on a pay-as-you-go basis, with contributions from current employers and employees funding payments to current retired persons. Generally, most employed and some self-employed and other persons are subject to mandatory insurance in the statutory retirement system. Certain persons, including employed members of particular professions (including some freelance professions) may apply for exemption, while others, as in the case of civil servants, are automatically exempt from mandatory participation in the statutory pension insurance system. Instead, exempted persons have to contribute to professional or public pension schemes or, in the case of civil servants and similar groups, they will benefit from special pension schemes for civil servants. Furthermore, the Retirement Funds Act (Altersvermögensgesetz) aims to ensure the long-term viability of the statutory pension insurance system by decreasing payments from the statutory pension insurance while encouraging insured persons to also sign up for designated privately funded or occupational pension schemes, for which certain bonus payments and tax incentives are provided.

Statutory health insurance coverage must remain available to all persons fulfilling the applicable eligibility criteria. Within the statutory health insurance system, insured persons may choose among a large number of statutory health insurance funds that have developed historically. Persons whose gross income exceeds certain thresholds as well as civil servants, self-employed persons and members of certain professions may opt out of the statutory system and choose private health insurance coverage, which, in case of opting-out, is obligatory as well. Contributions to the statutory health insurance system are based solely on the insured person’s income situation and are independent of the insured person’s gender, age and medical risk. By contrast, contributions towards private health insurance coverage are mainly calculated based on age, medical risk and the desired level of coverage.

Pursuant to the Citizen’s Benefit Act (Bürgergeld-Gesetz), basic income support for jobseekers underwent a reform with effect from January 1, 2023. The citizen’s benefit (Bürgergeld) is a cash benefit which jobseekers and their families receive from jobcentres to ensure their ability to cover their essential living expenses. Pursuant to the reform, in order to provide a reliable safety net for claimants of the citizen’s benefit, among others, the current rate of inflation will be taken into account to a greater extent in the annual process of reviewing citizen’s benefit amounts.

In 2023, social security revenue, as shown in the national accounts, amounted to EUR 826.3 billion, and expenditure was EUR 816.3 billion. The social security budget thus incurred a surplus of EUR 10.0 billion in 2023, after a surplus of EUR 8.3 billion in 2022.

Sources: Federal Ministry of Labour and Social Affairs, Citizen’s benefits: Basic income support for jobseekers (https://www.bmas.de/SharedDocs/Downloads/EN/PDF-Publikationen/a430e-buergergeld-englisch-pdf.pdf?__blob=publicationFile&v=5); Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2023 (March 2024), Table 3.4.3.7.

In light of a changing population structure, the Federal Government has already implemented structural reforms to the statutory pension system in order to safeguard its long-term sustainability. In addition, the Federal Republic has implemented reforms of the statutory pension insurance, which, since 2012, have gradually raised the regular retirement age by two years to the age of 67. For example, the 1964 birth cohort will reach the regular retirement age of 67 in 2031.

To increase the sustainability of the health care system, the Federal Republic has implemented several structural reform measures to strengthen competition among providers in order to improve the efficiency and quality of health care services.

Sources: Bundesministerium der Gesundheit, Themen, Krankenversicherung, Finanzierung, Gesundheitsfonds (https://www.bundesgesundheitsministerium.de/gesundheitsfonds.html); European Commission, Employment, Social Affairs & Inclusion, Germany - Pensions and other old age benefits (https://ec.europa.eu/social/main.jsp?catId=1111&intPageId=4554&langId=en).

International Economic Relations

International economic relations are of major importance to the German economy. In 2023, exports and imports of goods and services amounted to 47.1% and 43.0% of GDP at current prices, respectively. The Federal Republic supports the EU in pursuing a liberal foreign trade policy aimed at dismantling tariffs and other barriers to trade. The responsibility for trade matters (particularly WTO and free trade agreements) in the EU rests with the European Commission. For further information on the EU’s responsibility for trade matters, see “—General—The European Union and European Integration—Economic Integration.”

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 2023 (February 2024), Table 3.1.

G-24

Because of the openness of the Federal Republic’s economy, German growth and employment depend particularly on open markets and foreign trade. Accordingly, the Federal Government supports efforts to reduce trade barriers. The strengthening of the multilateral trading system, with the WTO at its center, is a priority both for Germany and the EU. Bilaterally, the Federal Government and the European Commission champion ambitious, balanced and comprehensive free trade agreements in order to strengthen the international competitiveness of the European economy and thus growth and employment in Europe, while also contributing to sustainable development. An example of these agreements is the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada, which was approved by the European Parliament in February 2017. On September 21, 2017, CETA entered into force provisionally; i.e., most of the agreement, with the exception of investment protection, investment market access for portfolio investment and the Investment Court System, is already in force. CETA will take full effect after ratification by all EU Member States. Similarly, in February 2019, a free trade agreement between the EU and Japan came into force (Economic Partnership Agreement), which is intended to remove the majority of duties and regulatory barriers.

Sources: Federal Ministry for Economic Affairs and Climate Action, Ongoing negotiations for free trade agreements (https://www.bmwk.de/Redaktion/EN/Artikel/Foreign-Trade/ongoing-negotiations-on-free-trade-agreements.html); Federal Ministry for Economic Affairs and Climate Action, CETA – The European-Canadian Economic and Trade Agreement (https://www.bmwk.de/Redaktion/EN/Dossier/ceta.html); European Commission, EU trade relationships by country/region, Countries and Regions, Canada, EU-Canada agreement (https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/canada/eu-canada-agreement_en); Federal Ministry for Economic Affairs and Climate Action, Free Trade Agreements, The EU-Japan Free Trade Agreement
(https://www.bmwk.de/Redaktion/EN/Artikel/Foreign-Trade/free-trade-agreement-japan.html).

Balance of Payments

The Federal Republic typically achieves a surplus in the trading of goods. Traditionally, this surplus has been partially offset by deficits in other fields, such as services and secondary income. In 2023, the current account surplus totaled EUR 243.1 billion, compared to EUR 164.6 billion in 2022, an increase of EUR 78.5 billion. Thus, the current account surplus increased by 1.7 percentage points to 5.9% of nominal GDP in 2023. This increase, which follows a significant decline in 2022, was mainly caused by a recovery of the balance in trade in goods due to falling prices for imported raw materials, particularly natural gas and other energy imports. In contrast, the deficit in the German services balance widened, likely due to catch-up effects in cross-border travel after the end of the COVID-19 pandemic.

Source: Deutsche Bundesbank, Monatsbericht März 2024, Chapter: Die deutsche Zahlungsbilanz für das Jahr 2023, Table 4.1.

According to data prepared by the Deutsche Bundesbank, applying the annual averages of a broad monthly indicator of Germany’s price competitiveness compared to 60 trading partners based on consumer price indices, Germany’s price competitiveness has been relatively stable since 1999, fluctuating within a range of approximately 10% of the average indicator value in the period from 1999 to 2022. In 2023, price competitiveness decreased by 2.9% compared to 2022, mainly due to the apreciation of the euro relative to several currencies, including the U.S. dollar, the Chinese yuan and the Japanese yen. However, the influence of variations in the exchange rates should be viewed in light of the fact that the Euro Area Member States account for a major part of German exports (39% in 2023).

In 2023, the euro appreciated against the U.S. dollar by 2.7%. The appreciation was mainly due to monetary tightening in the euro area being somewhat stronger than expected in 2022.

Source: Deutsche Bundesbank, Monatsbericht März 2024, Statistical Annex, Tables XII.3, XII.9 XII.11.

The following table shows the Federal Republic’s balance of payments for each of the years indicated.

BALANCEOF PAYMENTS (BALANCES)

	2023		2022		2021		2020		2019
	(EUR in millions)
Current account
Trade in goods (1)		226,821		125,916		196,491		182,725		219,548
Services (2)		-62,994		-37,289		1,615		6,634		-13,553
Primary income		143,901		142,094		123,181		86,037		128,602
Secondary income		-64,616		-66,091		-57,832		-52,889		-50,747
Total current account		243,112		164,630		263,454		222,507		283,849
Capital account (3)		-27,252		-21,644		-2,593		-10,345		-3,705
Financial account
Net German investment abroad (increase: +)		260,047		322,457		801,268		719,804		270,041
Net foreign investment in Germany (increase: +)		27,460		124,267		592,289		551,037		69,729
Net financial account (net lending: + / net borrowing: -)		232,587		198,190		208,978		168,767		200,312
Net errors and omissions (4)		16,727		55,204		-51,883		-43,395		-79,832

(1) Including supplementary trade items.

(2) Including the freight and insurance costs of foreign trade.

(3) Including net acquisition/disposal of non-produced non-financial assets.

(4) Statistical errors and omissions, resulting from the difference between the balance on the financial account and the balances on the current account and the capital account.

Sources: Deutsche Bundesbank, Zahlungsbilanzstatistik, Stand vom 11.4.2024, Table I. Wichtige Posten der Zahlungsbilanz (https://www.bundesbank.de/resource/blob/805258/b557d7333af239540a07f8448366a892/mL/i-wichtige-posten-data.pdf); Deutsche Bundesbank, Zahlungsbilanzstatistik, Stand vom 11.4.2024, Table IV. Kapitalbilanz 1. Übersicht a) Insgesamt (https://www.bundesbank.de/resource/blob/805274/0400f22fabf3c5555707bead12cd7b4b/mL/iv-kapitalbilanz-data.pdf).

G-25

Balance of Trade

The following tables show information relating to foreign trade of the Federal Republic for each of the years indicated.

TRADEIN GOODS (1)

	2023		2022		2021		2020		2019
	(EUR in millions)
Exports of goods		1,539,230		1,579,998		1,375,112		1,188,235		1,309,678
Imports of goods		1,312,409		1,454,082		1,178,621		1,005,510		1,090,130
Trade balance		226,821		125,916		196,491		182,725		219,548

(1) Including supplementary trade items.

Source: Deutsche Bundesbank, Zahlungsbilanzstatistik, Stand vom 11.4.2024, Table I. Wichtige Posten der Zahlungsbilanz (https://www.bundesbank.de/resource/blob/805258/b557d7333af239540a07f8448366a892/mL/i-wichtige-posten-data.pdf).

In 2023 the Federal Republic’s principal export goods were: (1) motor vehicles, trailers and semi-trailers, (2) machinery and equipment not elsewhere classified, (3) chemicals and chemical products and (4) computer, electronic and optical products. The principal import goods were: (1) motor vehicles, trailers and semi-trailers (2) computer, electronic and optical products, (3) electrical equipment and (4) machinery and equipment not elsewhere classified. The Federal Republic has relatively few resources of industrial raw materials. As a result, it largely depends on imports to satisfy its demand for raw materials. This dependence on foreign supplies is particularly significant in the case of metals such as copper, tungsten, niobium, rare earth, rock phosphate, lithium carbonate, bauxite, manganese, titanium, and tin. The Federal Republic imports about 70% of its energy requirements, including 98% of its oil and 95% of its natural gas requirements.

Sources: Statistisches Bundesamt, Statistischer Bericht Außenhandel - Dezember 2023 (February 2024), Tables 51000-05 and 51000-06 (https://www.statistischebibliothek.de/mir/receive/DEHeft_mods_00158198); Bundesanstalt für Geowissenschaften und Rohstoffe, Deutschland – Rohstoffsituation 2022 (https://www.bgr.bund.de/DE/Themen/Min_rohstoffe/Downloads/rohsit-2022.pdf?__blob=publicationFile&v=4).

Germany’s Current Account Surplus and the Macroeconomic Imbalance Procedure

Within the framework of the MIP, in December 2023, the European Commission published the Alert Mechanism Report 2024, which noted that Germany’s large current account surplus had moderated substantially in 2022, primarily as a result of much higher energy prices, but widened again in 2023, as energy prices declined and domestic demand remained weak. The scoreboard reading for Germany shows that the current account balance, export market shares and government debt exceeded their indicative thresholds in 2022. However, price and cost competitiveness developments contributed to a more symmetric euro area adjustment, as nominal unit labour costs were expected to grow somewhat faster than in the euro area in 2023. Moreover, there were only limited concerns related to government debt given that the government debt-to-GDP ratio only moderately exceeded the 60% threshold and is forecast to decrease in the future. Until early 2022, nominal house price growth in Germany had been among the highest in the EU. While house prices have declined significantly since then, house prices are still estimated to be overvalued by about 10% and the correction in house prices may continue as the market continues to adjust to higher interest rates.

In the previous round of the MIP, the Commission carried out an in-depth review and concluded that Germany was experiencing macroeconomic imbalances. In the current round of the MIP 2023/2024, the Commission will again examine the persistence of imbalances or their unwinding in an in-depth review of Germany.

The Federal Government supports the European Commission in the implementation of the MIP. Together with its European partners, the Federal Government aims to reduce economic imbalances while complying with the rules of the reformed SGP. However, the Federal Government points out that German foreign direct investments abroad increase the current account balance, as does the interest and capital income generated from past foreign direct investments. Furthermore, the current account surplus is the result of market-based decisions by companies and individuals that determine supply and demand. The German economy’s specialization in the export of capital goods also plays a key role in the high surplus. In 2023, the current account balance increased to 6.8% of GDP according to Germany’s National Reform Programme 2024. This rebound in the current account balance reflects a countermovement to 2022, when the nominal value of imports had increased strongly due to the sharp rise in fossil fuel prices, meaning that the trade balance in particular had fallen sharply in 2022. Overall, the trade balance remained below pre-COVID-19 pandemic levels in 2023 at 4.3% of GDP. In contrast, the importance of the primary income balance – which reflects cross-border labor income and, above all, capital income – for the current account balance has been increasing and reached a high of 4.0% of GDP in 2023. The development of the primary income balance mainly reflects the returns on German foreign assets and their holdings and is even harder to influence through economic policy than the trade balance. Increasing private investment activity and the expansion of public investment are sustainably strengthening domestic demand, increasing growth potential in the medium term and thus contributing both directly and indirectly to limiting the current account surplus.

G-26

For general information on the MIP, see “—General—The European Union and European Integration—EU Economic Governance—Macroeconomic Imbalance Procedure.”

Sources: European Commission, Report from the Commission to the European Parliament, the Council, the European Central Bank and the European Economic and Social Committee, Alert Mechanism Report 2024, December 2023 (https://economy-finance.ec.europa.eu/document/download/2a0c9259-7ea3-4f5b-ac11-85333afd1cd7_en?filename=ip261_en_UPD.pdf); European Commission, Economy and Finance, Economic and fiscal governance, Macroeconomic Imbalance Procedure (https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/macroeconomic-imbalance-procedure_en); Bundesministerium für Wirtschaft und Klimaschutz, Nationales Reformprogramm 2024 (https://www.bmwk.de/Redaktion/DE/Publikationen/Europa/nationales-reformprogramm-2024.pdf?__blob=publicationFile&v=12); Bundesministerium der Finanzen, Monatsbericht des BMF März 2017, Analysen und Berichte, Der deutsche Leistungsbilanzsaldo – Entwicklung und wirtschaftspolitische Implikationen (https://www.bundesfinanzministerium.de/Monatsberichte/2017/03/Inhalte/Kapitel-3-Analysen/3-2-Der-deutsche-Leistungsbilanzsaldo.html).

COMPOSITIONOF EXPORTEDAND IMPORTED GOODS

	2023 (1)
	Imports		Exports
	(Percent of total)
Products of agriculture and hunting		2.6		0.7
Products of forestry		0.0		0.1
Fish and products of fishing		0.1		0.0
Coal and lignite		0.5		0.0
Crude petroleum and natural gas		5.2		0.2
Metal ores		0.7		0.0
Other mining and quarrying products		0.1		0.1
Food products		4.8		4.7
Beverages		0.5		0.5
Tobacco products		0.4		0.2
Textiles		0.8		0.8
Wearing apparel		2.7		1.6
Leather and related products		1.2		0.8
Wood and of products of wood and cork, except furniture; articles of straw and plaiting materials		0.5		0.6
Paper and paper products		1.2		1.4
Coke and refined petroleum products		2.4		1.3
Chemicals and chemical products		7.6		9.0
Basic pharmaceutical products and pharmaceutical preparations		5.5		7.2
Rubber and plastic products		2.7		3.5
Other non-metallic mineral products		0.9		1.2
Basic metals		5.1		4.8
Fabricated metal products, except machinery and equipment		2.8		3.2
Computer, electronic and optical products		10.5		8.6
Electrical equipment		8.1		7.2
Machinery and equipment not elsewhere classified		7.7		14.3
Motor vehicles, trailers and semi-trailers		11.0		17.2
Other transport equipment		2.8		3.2
Furniture		1.1		0.8
Energy		0.5		0.4
Other goods		9.8		6.6
Total		100.0		100.0

(1) Preliminary data. Calculation of percentages by KfW based on import and export values in EUR thousands, respectively, as per the source below; figures may not add up to total due to rounding.

Source: Statistisches Bundesamt, Außenhandel – Erste Detailzahlen zum Außenhandel – Dezember 2023 (February 2024), Table GP (https://www.destatis.de/DE/Themen/Wirtschaft/Aussenhandel/Tabellen/aussenhandel-detaildaten.html).

G-27

FOREIGN TRADE (SPECIAL TRADE)BY GROUPSOF COUNTRIESAND COUNTRIES (1)

	2023		2022		2021
	(EUR in millions)
Exports to:
Total		1,589,962		1,594,034		1,379,346
of which:
United States		157,963		156,208		121,980
France		120,220		118,168		102,741
The Netherlands		115,265		112,261		101,050
China (2)		97,331		106,762		103,564
Italy		87,302		89,191		75,526
Austria		81,947		90,270		72,385
United Kingdom		78,466		73,764		65,002
Belgium/Luxembourg		69,272		70,933		58,080
Switzerland		66,569		70,611		60,638
New industrial countries and emerging markets of Asia (3)		60,926		63,344		55,295
Spain		54,472		49,935		43,932
Japan		20,232		20,511		18,245
Imports from:
Total		1,364,991		1,505,434		1,204,050
of which:
China (2)		156,741		192,830		142,964
The Netherlands		105,092		114,998		105,113
United States		94,606		93,338		72,316
Italy		72,119		73,177		65,389
France		69,925		69,969		61,921
New industrial countries and emerging markets of Asia (3)		66,219		71,012		55,441
Belgium/Luxembourg		56,913		67,071		55,726
Austria		54,583		58,137		47,492
Switzerland		51,795		55,723		49,247
Spain		39,110		37,756		34,180
United Kingdom		36,704		40,314		32,245
Japan		25,645		25,413		23,477

(1) Exports (f.o.b.) by country of destination, imports (c.i.f.) by country of origin. Special trade consists mainly of goods that are imported into the Federal Republic for use, consumption, adaptation or processing, as well as goods that are produced, manufactured, adapted or processed in the Federal Republic and subsequently exported.

(2) Excludes Hong Kong.

(3) Includes Brunei Darussalam, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.

Source: Deutsche Bundesbank, Monatsbericht März 2024, Table XII.3.

G-28

Foreign Direct Investment

The following table presents data with respect to foreign direct investment stocks at year-end 2021.

FOREIGN DIRECT INVESTMENT STOCKSAT YEAR-END 2021

	Outward (1)		Inward (2)
	(EUR in billions)
Total (3)		1,426.4		615.3
Selected countries and regions
European Union		488.7		380.4
of which: European Monetary Union		354.0		368.1
United Kingdom		102.2		40.5
Switzerland		52.9		47.6
Russia		22.1		2.4
United States		408.9		66.9
Canada		22.1		1.3
Central America		24.8		12.8
South America		30.0		1.9
Asia		210.2		46.5
of which: China		102.7		4.6
of which: India		20.5		0.5
of which: Japan		15.4		25.7
Australia		20.2		3.6
Africa		11.5		1.3
Selected economic sectors of investment object
Manufacturing		490.5		146.6
of which: Chemicals and chemical products		102.2		18.3
of which: Pharmaceutical products		37.4		18.3
of which: Machinery and equipment		46.5		16.2
of which: Motor vehicles, trailers and semi-trailers		107.8		4.8
Electricity, gas, steam and air conditioning supply		33.9		29.2
Wholesale and retail trade; repair of motor vehicles and motor cycles		235.6		61.1
Information and communication		62.9		46.4
Financial and insurance activities		349.4		207.1
Real estate activities		64.0		34.6
Professional, scientific and technical activities		91.5		54.2

(1) German foreign direct investment abroad.

(2) Foreign direct investment in Germany.

(3) Primary and secondary direct investment (consolidated).

Source: Deutsche Bundesbank, Direktinvestitionsstatistiken, II. Bestandsangaben über Direktinvestitionen (nach dem Erweiterten Richtungsprinzip), Tables 1I.1.b, II.2.b (https://www.bundesbank.de/de/statistiken/aussenwirtschaft/direktinvestitionen/direktinvestitionsstatistiken-804078).

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MONETARY AND FINANCIAL SYSTEM

The ESCB and the Eurosystem

The ESCB comprises the ECB and the national central banks of all EU Member States, while the Eurosystem consists only of the ECB and the national central banks of the Euro Area Member States.

The Eurosystem is responsible for the single monetary policy for the euro area. Its decision-making bodies are the Governing Council and the Executive Board of the ECB. The national central banks of the EU Member States that are not part of the Eurosystem are represented in the General Council of the ECB, but have no voting right in the decision-making process, particularly with respect to monetary policy. The ESCB’s primary objective is to maintain price stability. Without prejudice to this objective, the ESCB supports the general economic policies of the EU.

The Deutsche Bundesbank – Germany’s national central bank within the ESCB – has the responsibility of implementing the single monetary policy in Germany and continues to perform various other tasks, including operating cashless payment systems, cash management and playing an important role in banking and financial market supervision, as further described below under the caption “—Financial System.”

Sources: European Central Bank, Annual Report 2016, pages 101-107 (https://www.ecb.europa.eu/pub/pdf/annrep/ar2016en.pdf); European Central Bank, About us, Our Organisation: ECB, ESCB and the Eurosystem (https://www.ecb.europa.eu/ecb/orga/escb/html/index.en.html); Deutsche Bundesbank, Tasks (https://www.bundesbank.de/en/tasks).

Monetary Policy

Monetary Policy Instruments of the ESCB and the ECB

To achieve its operational goals, the ESCB conducts open market operations, offers standing facilities and requires credit institutions to maintain minimum reserves in accounts with the ESCB. Open market operations play an important role in the ESCB’s monetary policy for the purposes of steering interest rates and managing the liquidity situation in the market. Available open market operations are short-term and longer-term reverse transactions, outright transactions, the issuance of debt certificates or foreign exchange swaps, and the collection of fixed-term deposits. Standing facilities are designed to provide or absorb overnight liquidity, and the imposition of minimum reserve requirements allows the ESCB to stabilize money market interest rates, create (or enlarge) a structural liquidity shortage and possibly contribute to the control of monetary expansion. In addition the ECB also provides forward guidance, i.e., it provides information about its future monetary policy intentions, based on its assessment of the outlook for price stability. In March 2024, the ECB completed the review of its operational framework for the implementation of monetary policy. The Governing Council agreed to continue to provide liquidity through a broad mix of instruments, including short-term and longer-term refinancing operations and, at a later stage, structural longer-term credit operations and a structural portfolio of securities.

Sources: European Central Bank, Monetary policy & markets, Instruments, The Eurosystem’s instruments (https://www.ecb.europa.eu/mopo/implement/html/index.en.html); European Central Bank, Statement by the governing council, Changes to the operational framework for implementing monetary policy, press release of March 13, 2024 (https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.pr240313~807e240020.en.html).

Monetary Policy Strategy and Prices

The ECB presented its revised monetary strategy in July 2021, its first revision since 2003. Its primary goal is to maintain medium-term price stability, which is defined as a year-on-year increase in the harmonized index of consumer prices for the euro area of 2%. The 2% target is symmetric. This means that the ECB considers negative and positive deviations from the target to be equally undesirable. When the economy is operating close to the lower bound on nominal interest rates, particularly forceful or persistent monetary policy action may be required to prevent negative deviations from the inflation target from becoming entrenched. The new strategy considers formerly unconventional measures such as asset purchasing programs to be part of its monetary tool kit for these purposes. The Governing Council of the ECB seeks to achieve price stability over the medium term. This allows for short-term deviations of inflation from its target, provides the necessary flexibility and makes it possible to take other considerations into account. The medium-term orientation indicates the commitment to provide an adequate margin to avoid the risk of deflation. The stability-oriented monetary policy strategy of the Eurosystem used by the ECB to achieve this goal is based on two independent analyses: (1) analysis and assessment of short-to medium-term risks to price stability (economic analysis); and (2) assessment of medium-to long-term monetary and financial developments (monetary and financial analysis).

Source: European Central Bank, Monetary policy & markets, Monetary policy strategy (https://www.ecb.europa.eu/mopo/strategy/html/index.en.html).

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The following table shows price trends in Germany for the periods indicated.

PRICE TRENDS

	2023		2022		2021		2020		2019
	(change from previous year in %)
Harmonized index of consumer prices (HICP)		6.0		8.7		3.2		0.4		1.4
Consumer price index (CPI)		5.9		6.9		3.1		0.5		1.4
Index of producer prices of industrial products sold on the domestic market (1)		-2.4		32.9		10.5		-1.0		1.1

(1) Excluding value-added tax.

Sources: Statistisches Bundesamt, Preise, Verbraucherpreisindex und Inflationsrate, Harmonisierter Verbraucherpreisindex, Jahresdurchschnitte, Veränderung zum Vorjahr (https://www.destatis.de/DE/Themen/Wirtschaft/Preise/Verbraucherpreisindex/Tabellen/Harmonisierter-Verbraucherpreisindex.html); Statistisches Bundesamt, Preise, Verbraucherpreisindex und Inflationsrate, Gesamtindex und 12 Abteilungen, Veränderung zum Vorjahr (https://www.destatis.de/DE/Themen/Wirtschaft/Preise/Verbraucherpreisindex/Tabellen/Verbraucherpreise-12Kategorien.html); Deutsche Bundesbank, Monatsbericht Dezember 2022, Table XI.7; Deutsche Bundesbank, Monatsbericht Februar 2024, Table XI.7.

Official Foreign Exchange Reserves

The following table shows the breakdown of the Federal Republic’s official foreign exchange reserves as of the end of the years indicated.

OFFICIAL FOREIGN EXCHANGE RESERVESOFTHE FEDERAL REPUBLIC (1)

	As of December 31
	2023		2022		2021		2020		2019
	(EUR in millions)
Gold		201,335		184,036		173,821		166,904		146,562
Special drawing rights		48,766		48,567		46,491		14,014		14,642
Foreign currency balances		33,376		34,404		32,649		30,066		32,039
Reserve position in the IMF		8,782		9,480		8,426		8,143		6,051
Total		292,259		276,488		261,381		219,127		199,295

(1) External position of the Deutsche Bundesbank in the EMU. Assets and liabilities vis-à-vis all EMU member countries and non-EMU member countries.

Source: Deutsche Bundesbank, Monatsbericht Februar 2024, Table XII.7.

The Federal Republic’s foreign reserve assets are managed by the Deutsche Bundesbank. The Euro Area Member States have transferred foreign reserve assets to the ECB in an aggregate amount equivalent to approximately EUR 40.7 billion, consisting of foreign currency reserves and gold. The ECB manages the foreign reserve assets transferred to it. The foreign reserve assets not transferred to the ECB continue to be held and managed by the national central banks of the Euro Area Member States. In order to ensure consistency within the single monetary and foreign exchange policies of the EMU, the ECB monitors and coordinates market transactions conducted with those assets.

Sources: European Central Bank, Annual Report 1998, page 74 (https://www.ecb.europa.eu/pub/pdf/annrep/ar1998en.pdf); European Central Bank, Annual Accounts 2023, 2.1 Balance Sheet as at 31 December 2023, note 12.1
(https://www.ecb.europa.eu/press/annual-reports-financial-statements/annual/annual-accounts/html/ecb.annualaccounts2023~f5a98cb02b.en.html).

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External Positions of Banks

The following table shows the external assets and liabilities of the Deutsche Bundesbank and the banks (monetary financial institutions) of the Federal Republic as of the end of each of the years indicated.

EXTERNAL FINANCIAL ASSETSAND LIABILITIESBY SECTOR

	2023		2022		2021		2020		2019
	(EUR in billions)
Deutsche Bundesbank
Assets		1,455.8		1,617.1		1,592.8		1,429.2		1,161.0
of which: clearing accounts within ESCB (1)		1,093.4		1,269.1		1,260.7		1,136.0		895.2
Liabilities (2)		779.8		919.4		1,009.5		781.3		663.3
Net position		675.9		697.6		583.3		647.9		497.7
Banks
Loans to foreign banks		1,166.9		1,151.3		1,100.7		1,024.3		1,064.2
Loans to foreign non-banks		960.4		913.7		871.2		822.8		795.3
Loans from foreign banks		923.8		998.4		914.6		761.2		680.6
Loans from foreign non-banks		380.6		370.3		288.2		258.5		229.8

(1) Consists mainly of net claims from the interbank payment system for the real-time processing of cross-border transfers throughout the EMU (TARGET2).

(2) Including estimates of currency in circulation abroad.

Source: Deutsche Bundesbank, Monatsbericht März 2024, Tables IV.4 and XII.7.

Foreign Exchange Rates and Controls

Since its introduction in 1999, the euro has become the second most widely used currency internationally. It is recognized by the IMF as a freely usable currency. Neither currency transactions nor capital market transactions require licenses or other permissions. However, in both cases entities or individuals providing related services on a commercial basis must be licensed. Gold may be imported and exported freely, subject only to the levy of VAT on some transactions.

Sources: International Monetary Fund, Selected Decisions and Selected Documents of the IMF, Forty-Second Issue—Freely Usable Currencies, as updated December 31, 2021 (https://www.imf.org/external/pubs/ft/sd/2022/42nd_Sel_Dec_EN_Web_FINAL.pdf); Bank for International Settlements, Triennial Central Bank Survey, OTC Foreign exchange turnover in April 2022, October 2022, Table “OTC foreign exchange turnover by currency”, page 12 (https://www.bis.org/statistics/rpfx22_fx.pdf); Bundesanstalt für Finanzdienstleistungsaufsicht, Banken, Finanzdienstleister und Wertpapierinstitute, Markteintritt, Wertpapierdienstleistungen, as updated on November 22, 2021 (https://www.bafin.de/DE/Aufsicht/BankenFinanzdienstleister/Markteintritt/Wertpapierdienstleistungen/wertpapierdienstleistungen_node.html#doc19645032bodyText1); Bundesanstalt für Finanzdienstleistungsaufsicht, Banken, Finanzdienstleister und Wertpapierinstitute, Markteintritt, Finanzdienstleistungen, as updated on August 8, 2023 (https://www.bafin.de/DE/Aufsicht/BankenFinanzdienstleister/Markteintritt/Finanzdienstleistungen/finanzdienstleistungen_artikel.html); Intenational Monetary Fund, Annual Report on Exchange Arrangements and Exchange Restrictions 2022, published on July 26, 2023, page 1579

(https://www.imf.org/en/Publications/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions/Issues/2023/07/26/Annual-Report-on-Exchange-
Arrangements-and-Exchange-Restrictions-2022-530144).

The following table shows the annual average exchange rates for selected currencies in relation to the euro for the years indicated.

ANNUAL AVERAGE EXCHANGE RATESOFTHE EURO (1)

	2023		2022		2021		2020		2019
U.S. dollars per euro		1.0813		1.0530		1.1827		1.1422		1.1195
Pound sterling per euro		0.86979		0.85276		0.85960		0.88970		0.87777
Japanese yen per euro		151.99		138.03		129.88		121.85		122.01
Swiss franc per euro		0.9718		1.0047		1.0811		1.0705		1.1124
Chinese yuan per euro		7.6600		7.0788		7.6282		7.8747		7.7355

(1) Calculated from daily values.

Source: Deutsche Bundesbank, Monatsbericht Februar 2024, Table XII.9.

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Financial System

German Financial System

Overview. As of December 31, 2023, 1,334 monetary financial institutions in Germany reported an aggregate balance sheet total of EUR 10,398.2 billion to the Deutsche Bundesbank. According to the Deutsche Bundesbank’s classification, these institutions included:

• 240 commercial banks, with an aggregate balance sheet total of EUR 4,743.3 billion;

• 354 savings banks, with an aggregate balance sheet total of EUR 1,557.0 billion;

• the six regional institutions of those savings banks, including DekaBank Deutsche Girozentrale (the central asset managing institution of the German savings banks) and five Landesbanken (German public law financial institutions traditionally focusing on the banking business for and in the Land in which they operate), with an aggregate balance sheet total of EUR 858.0 billion;

• 18 special-purpose credit institutions, including KfW, KfW IPEX-Bank, promotional banks of the federal states (Landesförderinstitute), and, since July 2016, DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main (DZ Bank), the only remaining central institution of German credit cooperatives, with an aggregate balance sheet total of EUR 1,584.0 billion;

• 694 credit cooperatives, with an aggregate balance sheet total of EUR 1,172.2 billion;

• 7 mortgage banks, with an aggregate balance sheet total of EUR 224.2 billion;

• 15 building and loan associations, with an aggregate balance sheet total of EUR 259.5 billion; and

• 138 subsidiaries and branches of foreign banks located in the Federal Republic with an aggregate balance sheet total of EUR 2,310.5 billion. These institutions, which are majority-owned by foreign banks, are also included in the totals of the other categories of banks listed above.

Source: Deutsche Bundesbank, Monatsbericht Februar 2024, Table IV.2.

The KWG currently regulates all banks except for the Deutsche Bundesbank and KfW (although it does regulate KfW IPEX-Bank). Many important provisions of the KWG have become applicable by analogy to KfW with effect from January 1, 2016. For more information on the application of the KWG to KfW, see “KfW—General—Supervision and Regulation—Regulation.” German commercial banking institutions operate as “universal” banks and are not restricted by law or otherwise from offering a complete range of diverse financial services.

Supervision. The BaFin is responsible for the integrated supervision of financial services. Its primary objective is to ensure the proper functioning, stability and integrity of Germany as a financial center in the context of European integration and international cooperation, as well as to strengthen collective consumer protection through its regulatory actions. The BaFin, which is subject to the legal and technical oversight of the Federal Ministry of Finance, operates exclusively in the public interest. It aims to counteract risks to the assets entrusted to financial institutions, including banks and insurance companies (solvency supervision), and to safeguard fair and transparent conditions in the markets (market supervision). In addition, the BaFin has an investor protection role in that it seeks to prevent unauthorized financial business from being carried out.

The Deutsche Bundesbank is closely involved in the ongoing supervision of credit institutions by the BaFin and has been assigned a substantial number of the ongoing operational tasks in banking supervision. Furthermore, the German Federal Agency for Financial Market Stabilization (Bundesanstalt für Finanzmarktstabilisierung, or “FMSA”) supervises two wind-up institutions, Erste Abwicklungsanstalt and FMS Wertmanagement, as well as Portigon AG (the legal successor of former Landesbank WestLB which is in the process of being wound-up), all of which were founded under its auspices in order to stabilize the financial market (see “—Wind-up Institutions”).

In November 2014, the SSM – as one of the pillars of the Banking Union – became operational. Under the SSM, the ECB is the central prudential supervisor of financial institutions in the euro area as well as in non-euro area EU Member States that choose to join the SSM. The ECB directly supervises the most significant banks, while the national supervisors continue to monitor the remaining banks. The ECB and the national supervisors work closely together to ensure the banks’ compliance with EU banking regulations and to be able to address issues early on.

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In order to facilitate the timely identification of risks to financial stability, the Financial Stability Committee (Ausschuss für Finanzstabilität, or “FSC”), which consists of representatives of the Federal Ministry of Finance, the Deutsche Bundesbank and BaFin, was established in March 2013 based on the Financial Stability Act (Gesetz zur Überwachung der Finanzstabilität, Finanzstabilitätsgesetz). On basis of the Financial Stability Act and due to its macroeconomic and financial market expertise, the Deutsche Bundesbank is responsible for contributing towards safeguarding financial stability and tasked with analyzing all relevant factors in order to identify threats to financial stability. If appropriate, the Deutsche Bundesbank may propose and submit warnings or recommendations for corrective measures to the FSC, which may pass resolutions with respect thereto and publish them if appropriate. The recipients of such warnings or recommendations are required to report on the implementation of corrective measures. In addition, the FSC is tasked with discussing issues relevant for financial stability, coordinating and strengthening the cooperation of its members during times of crisis, discussing how to deal with warnings or recommendations issued by the European Systemic Risk Board (“ESRB”) and reporting to the Bundestag on a yearly basis.

For instance, based on the assessment of the risk situation in Germany as well as the development of supporting indicators, BaFin decided to increase the ratio of the national anticyclical capital buffer to 0.75% from February 1, 2022 onwards and ordered a capital buffer for systemic risks in the amount of 2% for residential real estate financing. This decision was supported by analyses carried out by the FSC and the ESRB. The associated requirements for hard equity became applicable as of February 1, 2023. In January 2024, Bafin confirmed that the national anticyclical capital buffer of 0.75% remains appropriate.

Sources: Bundesministerium der Justiz, Gesetz über das Kreditwesen (https://www.gesetze-im-internet.de/kredwg/index.html); Federal Financial Supervisory Authority, BaFin, Functions & history

(https://www.bafin.de/EN/DieBaFin/AufgabenGeschichte/aufgabengeschichte_node_en.html); Deutsche Bundesbank, Tasks, Banking supervision
(https://www.bundesbank.de/en/tasks/banking-supervision); Bundesanstalt für Finanzdienstleistungsaufsicht, Aufsichtsrichtlinie—Richtlinie zur Durchführung und Qualitätssicherung der laufenden Überwachung der Kredit-und Finanzdienstleistungsinstitute durch die Deutsche Bundesbank (Aufsichtsrichtlinie), May 21, 2013, revised on December 19, 2016

(https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Aufsichtsrecht/Richtlinie/rl_130521_aufsichtsrichtlinie.html); Federal Financial Supervisory Authority, Act on the Strengthening of German Financial Supervision, January 18, 2013

(https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/Fachartikel/2013/fa_bj_2013_01_finstabg_en.html); Federal Agency for Financial Market Stabilisation, FMSA

(https://www.fmsa.de/en/); Portigon AG: Unternehmensinformationen

(https://www.portigon.de/portigon-ag/unternehmensinformationen.html); Deutsche Bundesbank, Tasks, Financial and monetary system, Financial and monetary sability, Macroprudential surveillance by the G-FSC (https://www.bundesbank.de/en/tasks/financial-and-monetary-system/financial-
and-monetary-stability/macroprudential-surveillance-g-fsc-/macroprudential-surveillance-by-the-g-fsc-625732); European Commission, Banking & insurance, Banking union, Single supervisory mechanism

(https://finance.ec.europa.eu/banking/banking-union/single-supervisory-mechanism_en); Federal Financial Supervisory Authority, Law & Regulation, Administrative Acts, General Administrative Act ordering a capital buffer for systemic risks under section 10e of the KWG, published on March 30 2022 (https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/Aufsichtsrecht/Verfuegung/vf_220331_allgvfg_systemrisikopuffer_en.html); European Systemic Risk Board, National Policy, Countercyclical capital buffer, updated on March 28, 2024

(https://www.esrb.europa.eu/national_policy/ccb/html/index.en.html).

Bank Recovery and Resolution. Between January 1, 2015, and December 31, 2017, the FMSA (see “—Supervision”) acted as the German national resolution authority for banks. The FMSA was thus responsible for the recovery and resolution of all banks in Germany under the European Bank Recovery and Resolution Directive (“BRRD”), which were not directly supervised by the ECB within the framework of the SSM (see “—European Financial System—European System of Financial Supervision and European Banking Union”). The BRRD was adopted in May 2014 to provide authorities with comprehensive and effective arrangements to deal with failing banks at the national level and with cooperation arrangements to tackle cross-border banking failures. The BRRD includes rules to set up national resolution funds, which must be established by each EU Member State, and it requires banks to prepare recovery plans to overcome financial distress. Since the establishment of the SRF at the European level in 2016, the contributions raised by the national resolution authorities of participating Member States have in great part been transferred to the SRF pursuant to the intergovernmental agreement on the transfer and mutualisation of contributions to the SRF.

On January 1, 2018, FMSA’s duties deriving from its role as the national resolution authority were integrated into the BaFin as a new and independently operating division. At the same time, FMSA’s responsibilities of administering and managing the Financial Market Stabilization Fund (“Sondervermögen Finanzmarktstabilisierungsfonds,” or “FMS”) were incorporated into the Federal Republic of Germany – Finance Agency (Bundesrepublik Deutschland – Finanzagentur GmbH). The FMS was originally created during the financial crisis on October 17, 2008. Until the Single Resolution Mechanism (“SRM”) became fully operational on January 1, 2016, and functionally replaced the FMS, the latter was responsible for stabilizing German banks by extending guarantees covering the banks’ securities and by granting loans. The stabilization measures provided by the FMS amounted to EUR 14.6 billion in capital injections, while loss compensation payments made to FMS Wertmanagement totaled EUR 9.3 billion.

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For more information on the SRF and the SRM, see “—European Financial System—European System of Financial Supervision and European Banking Union.”

Sources: Federal Agency for Financial Market Stabilisation: History

(https://www.fmsa.de/en/history/); Federal Financial Supervisory Authority, Companies, Banks & financial services providers, Measures, Recovery and resolution

(https://www.bafin.de/EN/Aufsicht/BankenFinanzdienstleister/Massnahmen/SanierungAbwicklung/sanierung_abwicklung_node_en.html); Deutsche Bundesbank, Glossary, Restructuring Act

(https://www.bundesbank.de/dynamic/action/en/homepage/glossary/729724/glossary?firstLetter=R&contentId=653352#anchor-653352); European Commission, Banking & insurance, Banking regulation, Bank recovery and resolution

(https://finance.ec.europa.eu/banking/banking-regulation/bank-recovery-and-resolution_en); Bundesministerium der Finanzen, Gesetze und Gesetzesvorhaben, Verordnung über die Erhebung der Beiträge zum Restrukturierungsfonds für Kreditinstitute (Restrukturierungsfonds-Verordnung—RStruktFV)

(https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Verordnungen/2015-07-22-RStruktFV.html); Council of the European Union, Agreement on the Transfer and Mutualisation of Contributions to the Single Resolution Fund

(https://data.consilium.europa.eu/doc/document/ST%208457%202014%20INIT/EN/pdf); Gesetz zur Neuordnung der Aufgaben der Bundesanstalt für Finanzmarktstabilisierung (FMSA-Neuordnungsgesetz—FMSANeuOG)

(https://www.bundesfinanzministerium.de/Content/DE/Gesetzestexte/Gesetze_Gesetzesvorhaben/Abteilungen/Abteilung_
VII/18_Legislaturperiode/2016-12-28-FMSA-Neuordnungsgesetz/3-Verkuendetes-Gesetz.pdf?__blob=publicationFile&v=3);

Bundesrepublik Deutschland – Finanzagentur GmbH, FMS, Financial Market Stabilisation Fund

(https://www.deutsche-finanzagentur.de/en/fms/financial-market-stabilisation-fund).

Wind-up Institutions. In the wake of the global financial crisis, two wind-up institutions (Abwicklungsanstalten) for troubled German banks were established. The first wind-up institution, Erste Abwicklungsanstalt, was established in December 2009 to liquidate a portfolio of EUR 77.5 billion assumed from WestLB. It assumed a second portfolio consisting of an asset portfolio worth EUR 72.3 billion and a trading portfolio with a market value of approximately EUR 52.1 billion following the restructuring of WestLB. As of December 31, 2023, the combined portfolios had been reduced to approximately EUR 10.3 billion.

The second wind-up institution, FMS Wertmanagement, assumed a portfolio of EUR 175.7 billion from Hypo Real Estate Group in October 2010 to support restructuring efforts. In December 2014, FMS Wertmanagement acquired DEPFA Bank plc (“DEPFA”), which, as of December 31, 2013, had consolidated total assets amounting to EUR 49.1 billion from Hypo Real Estate Holding AG. In November 2021, FMS Wertmanagement closed the sale of DEPFA to BAWAG P.S.K. AG. As of December 31, 2023, FMS Wertmanagement’s portfolio had a nominal value of EUR 44.4 billion.

Sources: Erste Abwicklungsanstalt, I Annual Report 2023 (https://aa1.de/wp-content/uploads/2023/12/GB-2023_en.pdf); FMS Wertmanagement AöR, Investor Präsentation Nov. 2021, updated June 2023

(https://www.fms-wm.de/de/downloadcenter/investoren/praesentationen); FMS Wertmanagement AöR, About us

(https://www.fms-wm.de/en/about-us); FMS Wertmanagement AöR, Portfolio (https://www.fms-wm.de/en/portfolio).

European Financial System

European System of Financial Supervision and European Banking Union. The European system of financial supervisors became operational on January 1, 2011. At the macro-financial level, the ESRB was established, which provides macro-prudential oversight of the financial system. The ESRB’s role is to monitor and assess potential risks to the stability of the financial system. If necessary, it will issue risk warnings and recommendations for remedial action and will monitor their implementation. The ESRB is currently chaired by the President of the ECB.

At the micro-financial level, three supervisory authorities were established:

• the European Banking Authority;

• the European Insurance and Occupational Pensions Authority; and

• the European Securities and Markets Authority.

The three European Supervisory Authorities (“ESAs”) cooperate with the supervisory authorities of the EU Member States. National authorities are responsible for the day-to-day supervision of individual financial institutions, whereas the ESAs are responsible for ensuring that a single set of harmonized rules and consistent supervisory practices are applied by supervisory authorities of the EU Member States. The ESAs have, for example, the power to settle disputes among national financial supervisors by imposing legally binding mediation and to impose temporary bans on risky financial products or activities.

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One of the key elements of the Banking Union, which was established in the wake of the European sovereign debt crisis, is the SSM composed of the ECB and the national supervisory authorities of participating EU Member States, which, as of March 2024, are the Euro Area Member States and Bulgaria. The main aims of the SSM, which became operational in November 2014, are to contribute to the safety and soundness of credit institutions and the stability of the European financial system and to ensure consistent supervision. In its role within the SSM, the ECB directly supervises 113 significant banks and banking groups, which represent almost 82% of the total assets on the aggregated balance sheets of all credit institutions under its supervision. For the remaining banks, the ECB is responsible for setting and monitoring the supervisory standards and for working closely with the national competent authorities in the supervision of these banks.

Another key element of the Banking Union is the SRM which was established by a regulation adopted in July 2014 and became fully operational starting January 1, 2016 with the purpose of ensuring the orderly resolution of failing banks. The SRM consists of the Single Resolution Board (“SRB”) and the national resolution authorities of participating Member States. The SRB has broad powers in cases of bank resolution and manages the SRF. The SRB is responsible for the planning and resolution phases of cross-border banks and those directly supervised by the ECB, while national resolution authorities are responsible for all other banks under the BRRD. However, the SRB will always be responsible if the resolution of a bank requires access to the SRF. The SRF was built up over a period of eight years since 2016 and reached its target level of at least 1% of the amount of covered deposits of all credit institutions authorized in all the participating EU Member States at the end of 2023. As of December 31, 2023, the financial means available in the SRF amounted to EUR 78 billion, which are fully mutualized between participating EU Member States. The SRB continues to assess on an annual basis whether the available financial means have diminished below the target level of at least 1% in the relevant contribution period. In such event, further contributions to the SRF may be required. Banks have been making annual contributions to the SRF calculated on the basis of their liabilities, excluding own funds and covered deposits, and adjusted for risk. Companies defined in article 2 paragraph 5 of the EU Capital Requirements Directive IV (CRD IV), including KfW, are not required to contribute to the fund. As part of its pending reform, the ESM would be given the function of a backstop for the SRF. The backstop would be provided through public funds to offer immediate support and confidence to the market and would almost double the size of the SRF. The funds would have to be repaid by all banks of the Banking Union in the following years.

In November 2015, and as amended in October 2017, the European Commission proposed a European Deposit Insurance Scheme (“EDIS”) as an additional element of the Banking Union. In June 2022 the Eurogroup in inclusive format agreed that work on the Banking Union should focus on strengthening the common framework for bank crisis management and national deposit guarantee schemes (CMDI framework). In April 2023, the European Commission proposed a corresponding legislative package, which is being discussed by the Council and Parliament. At a later stage, a review of the state of the Banking Union is planned to take place to identify further measures that could strengthen and complete the Banking Union.

In response to the global economic and financial crisis, regulatory authorities and central banks launched a comprehensive regulatory reform program. As a result, in December 2010, the Basel Committee on Banking Supervision launched a first package, typically referred to as Basel III, of new standards on bank capital adequacy and liquidity to enhance the banking regulatory framework. In order to implement Basel III into EU law, previous EU capital requirement directives were replaced by the Capital Requirements Regulation (CRR), a regulation establishing prudential requirements, and the Capital Requirements Directive IV (CRD IV), a directive governing access to deposit-taking activities, both of which entered into force on January 1, 2014 and have since been gradually implemented in the EU Member States. Further measures were implemented by changes to CRR and CRD adopted by the European legislators in 2019 as described below. A second reform package was endorsed by the Basel Committee on Banking Supervision in December 2017 to finalize the post-crisis reforms. It aims to reduce excessive variability in the calculation of risk-weighted assets. In October 2021, the European Commission presented legislative proposals for further amendments to the CRR and CRD, and to finalize the implementation of the Basel III regulatory reforms in the EU. In December 2023, the preparatory bodies of the Council and Parliament endorsed the amendments (as described below), which are expected to be formally adopted in 2024.

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In May 2019, European legislators adopted a package of revised rules aimed at reducing risks in the EU banking sector. Most new rules started to apply in mid-2021. The package comprised two regulations and two directives, relating to bank capital requirements (amendments to CRR (CRR II) and CRD (CRD V)) and the recovery and resolution of banks in difficulty (amendments to BRRD and the Single Resolution Mechanism Regulation (SRMR)) and implemented reforms agreed at the international level following the 2007-2008 financial crisis to strengthen the banking sector and to address outstanding challenges to financial stability. Among the core measures agreed to reduce risk in the banking system, the package enhances the framework for bank resolution. It requires global-systemically important institutions (G-SIIs) to have more loss-absorbing and recapitalization capacity by setting the minimum requirements with respect to the amount and quality of own funds and eligible liabilities (MREL) to ensure an effective and orderly “bail-in” process. It also provides provisional safeguards and possible additional actions for resolution authorities. Additionally, the package strengthens bank capital requirements to reduce incentives for excessive risk taking, by including a binding leverage ratio, a binding net stable funding ratio, and setting risk sensitive rules for trading in securities and derivatives. As mentioned above, in December 2023, the final elements for the implementation of Basel III in the EU were agreed by the Council and Parliament. The amended CRR rules (CRR III) are expected to enter into force on January 1, 2025. The provisions in the renewed CRD (CRD VI) have to be transposed by EU Member States into national law. One of the main elements of the banking package is the introduction of the output floor, which works as a lower limit on the capital requirements that banks calculate when using their internal models and aims to reduce the excessive variability of banks’ capital requirements, as calculated with internal models. The legislative package also implements the Basel standard in relation to credit risks, market risks and operational risks, while taking into account specific features of the EU banking sector. Furthermore, the amendment strengthens the provisions related to environmental, social and governance risks as well as the rules applicable to the suitability of bank managers and key function holders (ie., the fit and proper assessment).

Sources: European Commission, Regulation, Supervision, European system of financial supervision (https://finance.ec.europa.eu/regulation-and-supervision/european-system-financial-supervision_en); European Central Bank, About, European System of Financial Supervision (https://www.bankingsupervision.europa.eu/about/esfs/html/index.en.html); European Commission, Banking & insurance, Banking Union (https://finance.ec.europa.eu/banking/banking-union_en); European Council, Council of the European Union, Policies, Banking Union (https://www.consilium.europa.eu/en/policies/banking-union/); European Central Bank, ECB assumes responsibility for euro area banking supervision, press release of November 4, 2014 (https://www.ecb.europa.eu/press/pr/date/2014/html/pr141104.en.html); European Central Bank, About, Single Supervisory Mechanism (https://www.bankingsupervision.europa.eu/about/thessm/html/index.en.html); European Central Bank - Banking Supervision, List of supervised entities (https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.listofsupervisedentities202402.en.pdf?637ec58a30eb59cd2c203d9910d25be0); Single Resolution Board, About, The SRB in the Banking Union, Single Resolution Mechanism (https://www.srb.europa.eu/en/content/single-resolution-mechanism-srm); European Commission, Single Resolution Mechanism to come into effect for the Banking Union, press release of December 31, 2015 (https://ec.europa.eu/commission/presscorner/detail/en/IP_15_6397); Single Resolution Board, Resolution, What is a bank resolution?, Banks under the SRB’s remit (https://www.srb.europa.eu/en/content/banks-under-srbs-remit); Single Resolution Board, The Single Resolution Fund (https://www.srb.europa.eu/en/single-resolution-fund); Single Resolution Board, News and Media, Single Resolution Fund: no expected contribution in 2024 as target level reached, press release of February 15, 2024 (https://www.srb.europa.eu/en/content/single-resolution-fund-no-expected-contribution-2024-target-level-reached); Bundesministerium der Justiz, Gesetz zur Errichtung eines Restrukturierungsfonds für Kreditinstitute (https://www.gesetze-im-internet.de/rstruktfg/); European Stability Mechanism, About us, ESM Reform (https://www.esm.europa.eu/about-esm/esm-reform); European Commission, Communication from the Commission: Completing the banking union, first published on October 11, 2017 (https://ec.europa.eu/finance/docs/law/171011-communication-banking-union_en.pdf); European Commission, Banking Union: Commission proposes reform of bank crisis management and deposit insurance framework, press release of April 18, 2023 (https://ec.europa.eu/commission/presscorner/detail/en/ip_23_2250); European Banking Authority, Activities, Implementing Basel III in Europe, The Basel framework: the global regulatory standards for banks (https://www.eba.europa.eu/activities/basel-framework-global-regulatory-standards-banks); Bank for International Settlements, Committees & associations, Basel Committee on Banking Supervision, Basel III: Finalising Post-Crisis Reforms (https://www.bis.org/bcbs/publ/d424.htm); European Commission, Banking Package 2021: new EU rules to strengthen banks’ resilience and better prepare for the future, press release of October 27, 2021 (https://ec.europa.eu/commission/presscorner/api/files/document/print/en/ip_21_5401/IP_21_5401_EN.pdf); European Commission, Latest updates on the banking package, supplementary information of December 14, 2023 (https://finance.ec.europa.eu/news/latest-updates-banking-package-2023-12-14_en); European Council, Council of the European Union, Banking Union: Council adopts measures to reduce risk in the banking system, press release of May 14, 2019 (https://www.consilium.europa.eu/en/press/press-releases/2019/05/14/banking-union-council-adopts-measures-to-reduce-risk-in-the-banking-system/).

Securities Market

The Federal Republic’s securities market is among Europe’s largest. Trading in listed securities is not legally or otherwise confined to the stock exchanges. It is estimated, however, that most transactions in equity securities are executed through stock exchanges. By contrast, debt securities, although typically listed, are predominantly traded over-the-counter.

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Highly developed secondary markets, combined with the distribution capabilities of an extensive network of financial institutions, provide the basis for the Federal Republic’s position in the world’s capital markets. Equity and debt issues are generally underwritten and distributed through banking syndicates, which typically include commercial banks as well as certain regional and specialized institutions. In Germany, the regulated securities markets are situated in Berlin, Dusseldorf, Frankfurt am Main, Hamburg, Hanover, Munich and Stuttgart. Additional regulated financial markets include the European Energy Exchange in Leipzig, an energy and energy-related commodities exchange, and the Eurex Terminbörse in Frankfurt am Main, a derivatives exchange market. All of the above are recognized as regulated markets of the EU according to Article 56 of Directive 2014/65/EU on Markets in Financial Instruments and comply with globally accepted regulatory standards.

Based on total turnover on German securities exchanges, the Frankfurt Stock Exchange, operated by Deutsche Börse AG, is by far the most important stock exchange in the Federal Republic.

Sources: European Union, Directive 2014/65/EU of May 15, 2014 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0065); European Securities and Markets Authority, MiFID/UCITS/AIFMD/EUSEF/EUVECA/ECSPR entities (https://registers.esma.europa.eu/publication/searchRegister?core=esma_registers_upreg); Deutsche Börse Group, Our company, Frankfurt Stock Exchange (under public law), The Frankfurt Stock Exchange (https://www.deutsche-boerse.com/dbg-en/our-company/frankfurt-stock-exchange).

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PUBLIC FINANCE

Receipts and Expenditures

The Federal Government, each of the Länder governments and each of the municipalities (Gemeinden) have separate budgets. The federal budget is the largest single public budget.

The fiscal year of the Federal Republic is the calendar year. The annual federal budget is passed by an act of Parliament. On the basis of a proposal prepared by the Ministry of Finance, the Federal Government introduces the federal budget bill to the Parliament, generally in the summer of each year. The proposal has to pass through three Bundestag sessions, the budget committee of the Bundestag, and the Bundesrat, which deliberates on the proposal twice. The final vote on the proposal is taken by the Bundestag in its third session.

In addition to the federal, Länder and municipal budgets, there are separate budgets for the social security funds and various special funds (Sondervermögen) of the federal administration and the Länder, as well as other extra-budgetary entities at all levels of government that are created for specific public purposes. General government, as defined in the national accounts, comprises all these different levels of government activity.

Total consolidated general government revenue, as presented in the national accounts, amounted to EUR 1,901.8 billion in 2023, with tax revenue of EUR 953.7 billion and net social contributions of EUR 709.6 billion.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2023 (March 2024), Table 3.4.3.2.

In 2023, VAT and the taxes on income and wealth, as presented in the national accounts, amounted to EUR 287.2 billion and EUR 529.7 billion, respectively. These joint taxes are distributed among the Federal Government, the Länder governments and municipal authorities, according to predetermined formulae. In addition to joint taxes, the Federal Government, the Länder governments and the municipal authorities each levy special taxes, for example, on tobacco and beer.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2023 (March 2024), Table 3.4.3.16.

Consolidated general government expenditure in 2023, as presented in the national accounts, amounted to a total of EUR 1,989.2 billion. The most significant consolidated general government expenditures were monetary social benefits (EUR 661.4 billion), social benefits in kind (EUR 359.8 billion) and employee compensation (EUR 327.4 billion). Other significant consolidated general government expenditures included intermediate consumption (EUR 256.5 billion), gross capital formation (EUR 108.0 billion), subsidies (EUR 66.3 billion) and interest on public debt (EUR 36.1 billion).

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2023 (March 2024), Table 3.4.3.2.

GENERAL GOVERNMENT ACCOUNTS (1)

	2023		2022		2021		2020		2019
	(EUR in billions)
Federal Government, Länder governments and municipalities
Revenue		1,229.8		1,198.3		1,119.3		1,004.7		1,049.6
of which: Current taxes (2)		953.7		946.6		879.2		773.0		827.7
Expenditure		1,327.2		1,303.5		1,251.6		1,117.6		1,005.7
Balance		-97.4		-105.2		-132.4		-112.9		43.9
Social security funds
Revenue		826.3		812.0		781.8		717.9		690.8
Expenditure		816.3		803.7		779.2		752.8		681.7
Balance		10.0		8.3		2.6		-34.8		9.1
General government
Revenue		1,901.8		1,821.2		1,712.9		1,569.9		1,616.5
Expenditure		1,989.2		1,918.1		1,842.6		1,717.6		1,563.4
Balance		-87.4		-96.9		-129.7		-147.7		53.0

(1) Definition according to the national accounts.

(2) Excluding taxes of domestic sectors paid to EU.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2023 (March 2024), Tables 3.4.3.2, 3.4.3.3 and 3.4.3.7.

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FEDERAL GOVERNMENT ACCOUNTS (1)

	2023		2022		2021		2020		2019
	(EUR in billions)
Revenue		532.8		502.0		471.6		421.2		456.9
of which: Current taxes (2)		447.3		435.4		405.2		359.1		396.4
Expenditure		611.8		626.3		615.7		508.3		435.4
Balance		-79.0		-124.3		-144.2		-87.1		21.5

(1) Definition according to the national accounts.

(2) Excluding taxes of domestic sectors paid to EU.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 – 2023 (March 2024), Table 3.4.3.4.

GENERAL GOVERNMENT EXPENDITURE: BREAKDOWNBY FUNCTIONS (1)

	2023		2022		2021		2020		2019
	(EUR in billions)
General public services		271.6		241.8		221.0		207.9		201.3
Defense		41.3		39.9		39.3		38.2		36.9
Public order and safety		67.8		64.4		61.2		58.2		56.3
Economic affairs		196.4		205.7		193.5		141.3		112.0
Environmental protection		27.9		22.5		26.4		24.1		20.6
Housing and community amenities		19.3		18.4		25.9		22.7		14.6
Health		313.6		331.4		315.4		288.7		253.0
Recreation, culture and religion		43.4		40.7		38.4		37.6		36.2
Education		187.2		176.2		166.9		159.6		151.9
Social protection		820.7		777.2		754.5		739.4		680.6
Total expenditure		1,989.2		1,918.1		1,842.6		1,717.6		1,563.4

(1) Definition according to the national accounts.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 - 2023 (March 2024), Table 3.4.3.11.

Germany’s General Government Deficit/Surplus and General Government Gross Debt

For purposes of the EU Member States’ reports to the European Commission under the EDP, the general government or “Maastricht” deficit/surplus refers to the difference between consolidated public sector revenue and consolidated public sector expenditure and is the balancing item “net borrowing/net lending” of the general government (central government, state government, local government and social security funds) as defined in ESA 2010. After eight annual surpluses in a row, the German general government budget balance turned negative in 2020 due to the impact of the COVID-19 pandemic. Following a general government deficit of 4.3% in 2020, 3.6% in 2021 and 2.5% in 2022, the German general government deficit amounted to EUR 87.4 billion or 2.1% of nominal GDP in 2023, which, for the second year in a row, is below the EU’s 3% reference value for the general government deficit. The German general government gross debt-to-GDP ratio decreased from 66.1% in 2022 to 63.6% in 2023, which is above the EU’s respective reference value of 60%.

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On March 23, 2020, the respective Ministers of Finance of the EU Member States agreed with the assessment of the European Commission that the condition for the use of the general escape clause under the SGP – a severe economic downturn in the euro area or the EU as a whole – had been fulfilled. The activated general escape clause allowed Germany and the other EU Member States to depart from the budgetary requirements that would normally apply under the European fiscal framework to tackle the economic consequences of the COVID-19 pandemic. The general escape clause continued to apply in 2023, against the backdrop of the economic consequences of Russia’s invasion of Ukraine, but was deactivated at the end of 2023 in line with the fiscal policy guidance for 2024 published by the European Commission on March 8, 2023. For further information, see also “General—The European Union and European Integration—EU Economic Governance—Stability and Growth Pact.”

Sources: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2023), Table 1.10; EUR-lex, Consolidated Version of the Treaty on the Functioning of the European Union

(https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02016E/TXT-20200301&from=EN); Deutsche Bundesbank, General government debt as defined in the Maastricht Treaty as a % of GDP - Germany - overall

(https://www.bundesbank.de/dynamic/action/en/statistics/time-series-databases/time-series-databases/745582/745582?listId=www_v27_web011_21a&treeAnchor=
FINANZEN&statisticType=BBK_ITS&tsId=BBK01.BJ9959&dateSelect=2023);

European Council, Council of the European Union, Statement of EU ministers of finance on the Stability and Growth Pact in light of the COVID-19 crisis, press release of March 23, 2020

(https://www.consilium.europa.eu/en/press/press-releases/2020/03/23/statement-of-eu-ministers-of-finance-on-the-stability-and-growth-pact-in-light-of-the-covid-19-crisis/); European Commission, Fiscal policy guidance for 2024: Promoting debt sustainability and sustainable and inclusive growth, press release of March 8, 2023
(https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1410).

As regards national fiscal rules, the German constitutional balanced budget rule known as the “debt brake” (Schuldenbremse) provides for a structural budget deficit of no more than 0.35% of GDP at the federal level and structurally balanced Länder budgets. The Bundestag suspended the debt brake for the years 2020 and 2021 in order to enable the financing of the governmental measures taken in connection with the COVID-19 pandemic as well as for the year 2022 due to Russia’s invasion of Ukraine. As a consequence of a ruling of the Federal Constitutional Court in November 2023, which clarified certain aspects of the application of the debt brake, the debt brake was also suspended for the year 2023 in the Supplementary Budget Act 2023 (Nachtragshaushaltsgesetz 2023). From 2024 onwards, the debt brake will apply again, as is reflected in the 2024 federal budget plan (Bundeshaushalt – Sollbericht 2024). In response to Russia’s invasion of Ukraine, the Federal Government established a Special Fund for the Federal Armed Forces (Sondervermögen Bundeswehr) with its own credit authorization of up to EUR 100 billion on a one-off basis. This one-off credit authorization is exempted from the debt brake. The Special Fund is being used to supplement the defense section of the Federal Budget to achieve the guideline of the North Atlantic Treaty Organization (NATO) of spending at least 2% of GDP each year on defense.

Sources: Bundesministerium der Finanzen, Fiskalregeln

(https://www.bundesfinanzministerium.de/Web/DE/Themen/Oeffentliche_Finanzen/Stabilitaetspolitik/Fiskalregeln/fiskalregeln.html); Bundesministerium der Finanzen, Kompendium zur Schuldenregel des Bundes (Schuldenbremse), February 25, 2022 (https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/
Oeffentliche_Finanzen/Schuldenbremse/kompendium-zur-schuldenbremse-des-bundes.pdf?__
blob=publicationFile&v=9); Bundestag, Bundestag billigt mit breiter Mehrheit Nachtragshaushalt für 2020 (https://www.bundestag.de/dokumente/textarchiv/2020/kw13-de-corona-schuldenbremse-688956); Bundestag, Finanzministerium-Etat beschlossen – Schuldenbremse bleibt ausgesetzt

(https://www.bundestag.de/dokumente/textarchiv/2020/kw50-de-finanzministerium-bundesrechnungshof-810030); The Federal Constitutional Court, Second Supplementary Budget Act 2021 is void, press release of November 15, 2023 (https://www.bundesverfassungsgericht.de/SharedDocs/Pressemitteilungen/EN/2023/bvg23-101.html); Bundesministerium der Finanzen, Bundesverfassungsgerichtsurteil: Bundesregierung zieht Konsequenzen und beschließt Nachtragshaushalt 2023, press release of November 27, 2023

(https://www.bundesfinanzministerium.de/Content/DE/Pressemitteilungen/Finanzpolitik/2023/11/2023-11-27-entwurf-nachtragshaushalt-2023-beschlossen.html); Bundesministerium der Finanzen, Sollbericht 2024: Ausgaben und Einnahmen des Bundeshaushalts, BMF-Monatsbericht Februar 2024

(https://www.bundesfinanzministerium.de/Monatsberichte/Ausgabe/2024/02/Inhalte/Kapitel-3-Analysen/3-1-sollbericht-2024.html); Bundesministerium der Finanzen, Sondervermögen Bundeswehr: Investitionen in unsere Freiheit, press release of March 16, 2022

(https://www.bundesfinanzministerium.de/Content/DE/Pressemitteilungen/Finanzpolitik/2022/03/2022-03-16-sondervermoegen-bundeswehr.html?
cms_pk_kwd=16.03.2022_Sonderverm%C3%B6gen+Bundeswehr+Investitionen+in+unsere+Freiheit&cms_pk_campaign=Newsletter-16.03.2022); Deutscher Bundestag, Dokumente, Textarchiv, 2022, Grundgesetzänderung für das Sondervermögen beschlossen

(https://www.bundestag.de/dokumente/textarchiv/2022/kw22-de-grundgesetzaenderung-897760); Bundesrat, Bundesrat kompakt – Das wichtigste zur Sitzung, Ausgewählte Tagesordnungspunkte der 1022. Sitzung am 10.06.2022, Bundeswehrsondervermögen – Mindestlohn – Rente – Pflegebonus, TOP 24A Bundeswehr (https://www.bundesrat.de/DE/plenum/bundesrat-kompakt/22/1022/1022-node.html).

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The following table shows historical information on the Federal Republic’s general government deficit/surplus and debt as a percentage of GDP.

THE FEDERAL REPUBLIC’S FISCAL MAASTRICHT CRITERIA

	2023		2022		2021		2020		2019
	(% of GDP)
General government deficit (-) / surplus (+)		-2.1		-2.5		-3.6		-4.3		1.5
General government gross debt		63.6		66.1		69.0		68.8		59.6

Sources: Statistisches Bundesamt, Fachserie 18, Reihe 1.2 – 4. Vierteljahr 2023 (February 2024), Table 1.10; Deutsche Bundesbank, Time series BBK01.BJ9959: General government debt as defined in the Maastricht Treaty as a % of GDP - Germany - overall
(https://www.bundesbank.de/dynamic/action/en/statistics/time-series-databases/time-series-databases/745582/745582?listId=www_v27_web011_21a&tsId=BBK01.BJ9959&dateSelect=2020).

Fiscal Outlook

On April 24, 2024, the Federal Government published the German Stability Program 2024, in accordance with the rules of the Stability and Growth Pact in force at that time. The German Stability Program 2024 contains budgetary projections for the years 2024 to 2028 at all government levels (Federation, Länder, local authorities and social security funds). The projections are based on (i) the Federal Government’s annual projection of macroeconomic trends of February 21, 2024, (ii) the results of the Working Party on Tax Revenue Estimates of October 26, 2023, (iii) the federal budget for 2024 adopted by the German Parliament on February 2, 2024, and (d) the fiscal plan until 2027.

The following table presents the Federal Government’s projection for key fiscal indicators in the years 2024 to 2028 compared to the results for these key fiscal indicators in 2023, as set out in the German Stability Program 2024.

GENERAL GOVERNMENT BUDGETARY PROSPECTS (1)

	2028		2027		2026		2025		2024		2023
Revenue		481⁄2		48		48		471⁄2		47		46.1
Total taxes		243⁄4		241⁄2		241⁄2		24		233⁄4		23.4
Social contributions		183⁄4		181⁄4		181⁄4		18		173⁄4		17.2
Property income		1⁄2		1⁄2		1⁄2		1⁄2		1⁄2		0.7
Other		41⁄2		43⁄4		43⁄4		43⁄4		5		4.8
Expenditure (2)		491⁄2		491⁄2		491⁄4		483⁄4		483⁄4		48.6
Compensation of employees and intermediate consumption		14		14		141⁄4		141⁄4		141⁄2		14.2
Social payments		261⁄2		261⁄4		26		251⁄2		251⁄4		24.8
Interest expenditure		11⁄4		11⁄4		1		1		1		0.9
Subsidies		1		1		1		1		1		1.6
Gross fixed capital formation		23⁄4		3		3		3		23⁄4		2.7
Capital transfers		13⁄4		13⁄4		13⁄4		2		21⁄4		2.3
Other		2		21⁄4		21⁄4		2		2		2.2
General government deficit (-) / surplus (+)		-1		-11⁄2		-11⁄4		-1		-13⁄4		-2.5
Federal Government		-1⁄2		-1⁄2		-3⁄4		-3⁄4		-11⁄4		-2.3
Länder governments		0		-1⁄4		-1⁄4		-1⁄4		-1⁄4		-0.2
Municipalities		-1⁄4		-1⁄4		-1⁄4		-1⁄4		-1⁄4		-0.3
Social security funds		-1⁄4		-1⁄2		-1⁄4		0		0		0.2
General government gross debt		62		63		631⁄4		631⁄4		64		63.6

(1) Forecast figures are rounded to one-quarter of a percent of GDP.

(2) Adjusted by the net amount of payments in connection with swaps.

Source: Bundesministerium der Finanzen, Deutsches Stabilitätsprogramm 2024

Tables 13 and 17

(https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/stabilitaetsprogramm-2024.pdf?__blob=publicationFile&v=8).

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Tax Structure

Income Tax

Significant sources of revenue for the general government are the various types of income taxes. Income taxation for employees and self-employed persons is based on a progressive tax scale with marginal tax rates ranging from 14% to 45% subject to the amount of taxable income. Employees pay taxes on their income from employment in the form of wage taxes. Self-employed persons typically pay estimated taxes during the year before filing their annual income tax return. Income generated by partnerships (Personengesellschaften) is not subject to tax at the partnership level, but at the level of the partners. The partners pay tax on this income according to their individual income tax brackets.

Income generated by corporations is subject to corporate income tax (Körperschaftsteuer) at a flat rate of 15%.

Capital income received by domestic taxpayers (all types of income from capital as well as private shareholders’ net gains from sales of shares in corporations) is subject to a final uniform tax rate of 25% (Abgeltungsteuer), taking into consideration an allowance (Sparerpauschbetrag) of EUR 1,000 (EUR 2,000 for married couples).

In addition to the various types of income tax, a solidarity surcharge of 5.5% is imposed on the applicable income tax liability. From January 1, 2021, onwards, the additional tax burden resulting from the solidarity surcharge has been abolished for approximately 90% of income taxpayers for the benefit of low and middle incomes.

Sources: Bundesministerium der Justiz, Einkommensteuergesetz (https://www.gesetze-im-internet.de/estg/index.html); Bundesministerium der Justiz, Körperschaftsteuergesetz
(https://www.gesetze-im-internet.de/kstg_1977/index.html); Bundesministerium der Justiz, Solidaritätszuschlaggesetz 1995, § 4 Zuschlagssatz
(https://www.gesetze-im-internet.de/solzg_1995/__4.html); Bundesministerium der Finanzen, Monatsbericht Januar 2024, Analysen und Berichte, Die wichtigsten steuerlichen Änderungen 2024
(https://www.bundesfinanzministerium.de/Monatsberichte/2024/01/Inhalte/Kapitel-3-Analysen/3-1-wichtigste-steuerliche-aenderungen-2024.html).

VAT and Consumption Taxes

VAT serves as a significant source of revenue. VAT is a general consumption tax that is imposed on the value of most goods and services. The standard rate applicable to most goods and services is 19%. Certain items that are classified as necessities, such as food (except food and beverages in restaurants) and books, are subject to a reduced rate of 7%.

Against the backdrop of Russia’s invasion of Ukraine and rising energy prices, the VAT rate for the supply of gas via the natural gas grid and district heating was temporarily reduced from 19% to 7% from October 1, 2022 until March 31, 2024. Similarly, initially in connection with the COVID-19 pandemic, the VAT rate for restaurant and catering services was temporarily reduced from 19% to 7% from July 1, 2020 until December 31, 2023.

In addition to the VAT, there are specific consumption taxes. The most significant specific consumption taxes relate to energy and tobacco.

Sources: Bundesministerium der Justiz, Umsatzsteuergesetz (https://www.gesetze-im-internet.de/ustg_1980/index.html); Bundesministerium der Justiz, Umsatzsteuergesetz, § 12 Steuersätze
(https://www.gesetze-im-internet.de/ustg_1980/__12.html); Die Bundesregierung, Im Bundesrat beschlossen – Umsatzsteuer auf Gas wird reduziert, published on October 26, 2022
(https://www.bundesregierung.de/breg-de/aktuelles/steuersenkung-gas-2125486); Bundesministerium der Justiz, Energiesteuergesetz
(https://www.gesetze-im-internet.de/energiestg/); Bundesministerium der Justiz, Tabaksteuergesetz
(https://www.gesetze-im-internet.de/tabstg_2009/index.html); Bundesministerium der Finanzen, BMF Schreiben vom 21.12.2023,
Auslaufen der ermäßigten Besteuerung von Restaurant- und Verpflegungsdienstleistungen gemäß § 12 Absatz 2 Nummer 15 Umsatzsteuergesetz; Einführung einer Nichtbeanstandungsregelung für die Silvesternacht
(https://www.bundesfinanzministerium.de/Content/DE/Downloads/BMF_Schreiben/Steuerarten/Umsatzsteuer/2023-12-21-auslaufen-der-ermaessigten-besteuerung-
von-restaurant-und-verpflegungsdienstleistungen-einfuehrung-einer-nichtbeanstandungsregelung-fuer-die-silvesternacht.html).

Environmental Tax and Emissions Trading

The environmental tax regime aims to encourage energy conservation and to mitigate climate change by providing incentives for a reduction of carbon emissions. Furthermore, it aims to allocate the burden of taxes and contributions more equally among labor, capital and natural resources. Key points of the environmental tax regime are an electricity tax and a fossil fuel energy tax. The electricity tax rate is EUR 20.50 per megawatt-hour. The rates of the fossil fuel energy tax are assessed in accordance with certain environmental criteria.

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In addition to the EU’s Emissions Trading System (ETS) for carbon emissions applied to the manufacturing and energy industries, Germany has introduced a national ETS for carbon emissions of the transportation and buildings sector from 2021 onwards, starting with a price on carbon emissions initially set at EUR 25 per ton in 2021, EUR 30 per ton in 2022 and rising incrementally thereafter. However, following Russia’s invasion of Ukraine and its impact on energy prices for households and companies, the projected price increase on carbon emissions was temporarily adjusted to EUR 30 per ton in 2023 (EUR 5 less per ton than previously planned). In 2026, allowances will be auctioned within a price range of EUR 55 (minimum) to EUR 65 (maximum) per ton of carbon emissions.

Sources: Bundesministerium der Justiz, Stromsteuergesetz (https://www.gesetze-im-internet.de/stromstg/index.html); Bundesministerium der Justiz, Stromsteuergesetz, § 3 Steuertarif (https://www.gesetze-im-internet.de/stromstg/__3.html); The Federal Government, Effectively reducing CO₂ emissions

(https://www.bundesregierung.de/breg-en/issues/climate-action/effectively-reducing-co2-1795850); Federal Ministry for Economic Affairs and Climate Action, Robert Habeck: “We are taking a more cautious approach to carbon pricing, reducing the burden on households and companies” – 2023 increase in carbon price postponed, press release of October 28, 2022

(https://www.bmwk.de/Redaktion/EN/Pressemitteilungen/2022/10/20221028-robert-habeck-we-are-taking-a-more-cautious-approach-to-carbon-
pricing-reducing-the-burden-on-households-and-companies.html); Die Bundesregierung, Der Klima und Transformationsfonds 2024 – Entlastung schaffen, Zukunftsinvestitionen sichern, Transformation gestalten, December 22, 2023

(https://www.bundesregierung.de/breg-de/aktuelles/der-klima-und-transformationsfonds-2024-2250738).

Trade Tax

Trade tax (Gewerbesteuer) is levied at the municipal level and is imposed on businesses and their objective earning power. The trade tax rate varies and depends on the municipality that levies the tax. Basis of assessment are the profits of a business enterprise as determined under income tax law or corporation tax law, increased or decreased by certain adjustments. The result is multiplied by the basic federal rate (Gewerbesteuermesszahl) to achieve the base amount for the trade tax (Steuermessbetrag), which is then multiplied by the municipal multiplier (Hebesatz). Beyond a required minimum level of 200% for the municipal multiplier, municipalities have discretion to fix the municipal tax collection rate. Based on a weighted average municipal multiplier of 403.32% in 2021 the average trade tax rate in 2022 amounted to 14.12%.

Sources: Bundesministerium der Justiz und für Verbraucherschutz, Gewerbesteuergesetz (https://www.gesetze-im-internet.de/gewstg/index.html); Bundesministerium der Finanzen, Die wichtigsten Steuern im internationalen Vergleich 2022, Overview 4, page 14

(https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/die-wichtigsten-steuern-im-internationalen-vergleich-
2022.pdf?__blob=publicationFile&v=6).

The following table provides an overview of the annual tax revenues of the general government divided by categories for each of the years indicated, as presented in the national accounts.

TAXES (1)

	2023		2022		2021		2020		2019
	(EUR in billions)
Current taxes		953.7		946.6		879.2		773.0		827.7
Taxes on production and imports		424.0		417.8		393.2		345.8		369.8
of which: VAT		287.3		285.7		259.4		221.6		244.1
Current taxes on income and wealth		529.8		528.8		486.0		427.3		457.9
of which: Wage tax		274.6		273.8		256.4		254.3		260.8
Assessed income tax		70.5		78.6		68.7		56.8		61.7
Non-assessed taxes on earnings		47.4		41.2		39.4		29.8		30.5
Corporate tax		48.3		49.2		44.6		25.8		34.1
Trade tax (Gewerbesteuer)		73.4		70.4		61.4		45.4		55.6
Capital taxes		9.3		9.2		9.8		8.7		7.0
Tax revenue of general government		963.0		955.9		889.0		781.7		834.7
Taxes of domestic sectors to EU		6.2		7.5		5.1		4.7		5.1
Taxes		969.2		963.3		894.1		786.4		839.8

(1) Definition according to the national accounts.

Source: Statistisches Bundesamt, Fachserie 18, Reihe 1.4 - 2023 (March 2024), Table 3.4.3.16.

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Government Participations

The Federal Republic and its various special funds held direct participations in 118 public and private enterprises as of December 31, 2022.

The following table shows information on the Federal Republic’s significant direct participations (including those held through special funds) as of December 31, 2022.

PARTICIPATIONSOF THEFEDERAL REPUBLIC

Enterprises	Total nominal capital of enterprise		Participation of the Federal Republic
	(EUR in millions)		(%)
Significant majority participations:
Deutsche Bahn AG		2,150		100.0
KfW Kreditanstalt für Wiederaufbau		3,750		80.0
Hypo Real Estate Holding GmbH (1)		909		100.0
Significant minority participations exceeding 25%:
Flughafen München GmbH		307		26.0

(1) Participations held by a special fund.

Source: Bundesministerium der Finanzen, Beteiligungsbericht des Bundes 2023 (https://www.bundesfinanzministerium.de/Web/DE/Themen/Bundesvermoegen/Privatisierungs_und_Beteiligungspolitik/Beteiligungspolitik/Beteiligungsberichte/beteiligungsberichte.html).

In December 2022, following approval by the European Commission under EU state aid rules, the Federal Government acquired approximately 99% of the share capital of energy company Uniper SE (“Uniper”) with the aim of securing the energy supply in Germany. Unless otherwise approved by the European Commission, the Federal Government is obliged to reduce its stake in Uniper to a maximum of 25% plus one share by 2028 at the latest. Uniper provides critical energy infrastructure in Germany and plays a key role in the supply of electricity and natural gas. As a result of Russia’s invasion of Ukraine and the subsequent halt in the supply of Russian natural gas to Germany, Uniper faced existential difficulties. Due to Uniper’s central role for the energy supply in Germany, the Federal Government decided on initial support measures in July 2022, which were adapted based on further developments in September 2022. In this context, Uniper had already received substantial support from KfW in the form of credit lines. Funds provided by KfW were since substituted by equity and repaid in part. Another company that was transferred to state ownership as a measure to safeguard energy security in Germany is SEFE. The European Commission confirmed these capital measures under state aid rules in December 2022. Specifically, the European Commission authorized the Federal Government to inject EUR 6.3 billion of additional equity into the company by substituting an existing KfW loan subject to certain competition-related conditions.

Sources: Bundesministerium der Finanzen, Bundesministerium für Wirtschaft und Klimaschutz, Einstieg des Bundes bei Energieversorger Uniper SE vollzogen, joint press release of December 22, 2022 (https://www.bundesfinanzministerium.de/Content/DE/Pressemitteilungen/Finanzpolitik/2022/12/2022-12-22-einstieg-bund-bei-uniper-vollzogen.html); Federal Ministry for Economic Affairs and Climate Action, European Commission approves equity capital for reorientation of SEFE, press release of December 20, 2022 (https://www.bmwk.de/Redaktion/EN/Pressemitteilungen/2022/12/20221220-european-commission-approves-equity-capital-for-reorientation-of-sefe.html).

Direct Debt of the Federal Government

As of December 31, 2023, the principal amount of the Federal Government’s direct debt totaled EUR 1,644.1 billion. For further information on the principal amount of the outstanding direct debt, see “Tables and Supplementary Information—I. Direct Debt of the Federal Government—Summary of the Principal Amount of the Outstanding Direct Debt of the Federal Government.”

The Federal Government raises funds primarily through the issuance of bonds and notes. Euro-denominated bonds and notes issued by the Federal Republic are evidenced by book entry and no certificates are issued.

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In addition to its own direct debt obligations, the Federal Government and its special funds had outstanding guarantees in an aggregate amount of EUR 743.6 billion as of December 31, 2022. Of this amount, EUR 119.1 billion were outstanding in the form of export credit insurance, which is handled by HERMES on behalf of and for the account of the Federal Government. Furthermore, EUR 22.4 billion of the aggregate amount were outstanding in the form of a guarantee for a loan to Greece according to the German Financial Stability Act, and EUR 90.3 billion of the aggregate amount were outstanding in the form of a guarantee for the European Financial Stability Facility.

Source: Bundesministerium der Finanzen, Finanzbericht 2024, Overview 8.1.3, pages 323-324 (https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/finanzbericht-2024.html).

For more detailed information regarding the Federal Government’s debt and guarantees, see “—Tables and Supplementary Information.”

For information on the Federal Government’s liability as of December 31, 2023 for capital subscriptions to various international financial organizations, see the table entitled “—Tables and Supplementary Information—III. Liabilities to International Financial Organizations.”

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TABLES AND SUPPLEMENTARY INFORMATION

I. DIRECT DEBTOFTHE FEDERAL GOVERNMENT

SUMMARYOFTHE PRINCIPAL AMOUNTOFTHE OUTSTANDING

DIRECT DEBTOFTHE FEDERAL GOVERNMENT

	Aggregate principal amount outstanding as of December 31, 2023
	(EUR in millions)
Federal Bonds (Bundesanleihen)		1,179,750
Federal Notes (Bundesobligationen)		255,000
Federal Treasury Notes (Bundesschatzanweisungen)		136,000
Treasury Discount Paper (Unverzinsliche Schatzanweisungen)		149,000
Inflation-linked Securities (Inflationsindexierte Bundeswertpapiere)		66,250
Green Federal Bonds (Grüne Bundesanleihen)		40,250
Green Five-year Federal Notes (Grüne Bundesobligationen)		15,500
Borrowers’ note loans (Schuldscheindarlehen)		4,297
Old debt (1)		4,474
Repurchased debt		-206,407
Total		1,644,114

(1) Mainly equalization and covering claims of the Deutsche Bundesbank, other banks and insurance companies in connection with the currency reform of 1948.

Source: Bundesministerium der Finanzen, Monatsbericht Januar 2024, Table “Entwicklung der Kreditaufnahme des Bundes im Dezember 2023”, page 74, and table “Entwicklung von Umlaufvolumen, Eigenbestände und Anlagen des Wirtschaftsstabilisierungsfonds (WSF) im Dezember 2023”, page 75 (https://www.bundesfinanzministerium.de/Monatsberichte/2024/01/Inhalte/Kapitel-4-Wirtschafts-und-Finanzlage/4-4-kreditaufnahme-des-bundes-und-seiner-sondervermoegen.html).

DEBT TABLES

1. FEDERAL BONDS (1)

Title	Interest rate		Year of issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
6.25% Bonds of the Federal Republic of 1994		6.25		1994		2024		12,750
6.5% Bonds of the Federal Republic of 1997		6.50		1997		2027		13,750
5.625% Bonds of the Federal Republic of 1998		5.625		1998		2028		17,000
4.75% Bonds of the Federal Republic of 1998		4.75		1998		2028		13,750
6.25% Bonds of the Federal Republic of 2000		6.25		2000		2030		11,750
5.5% Bonds of the Federal Republic of 2000		5.50		2000		2031		21,500
4.75% Bonds of the Federal Republic of 2003		4.75		2003		2034		24,500
4% Bonds of the Federal Republic of 2005		4.00		2005		2037		28,250
4.25% Bonds of the Federal Republic of 2007		4.25		2007		2039		19,250
4.75% Bonds of the Federal Republic of 2008		4.75		2008		2040		21,500
3.25% Bonds of the Federal Republic of 2010		3.25		2010		2042		19,500
2.5% Bonds of the Federal Republic of 2012		2.50		2012		2044		30,500
1.75% Bonds of the Federal Republic of 2014		1.75		2014		2024		22,500
2.5% Bonds of the Federal Republic of 2014		2.50		2014		2046		31,500
1.5% Bonds of the Federal Republic of 2014		1.50		2014		2024		22,500
1% Bonds of the Federal Republic of 2014		1.00		2014		2024		22,500
0.5% Bonds of the Federal Republic of 2015		0.50		2015		2025		30,500
1% Bonds of the Federal Republic of 2015		1.00		2015		2025		30,500
0.5% Bonds of the Federal Republic of 2016		0.50		2016		2026		33,500
0% Bonds of the Federal Republic of 2016		0.00		2016		2026		32,500
0.25% Bonds of the Federal Republic of 2017		0.25		2017		2027		30,500
0.5% Bonds of the Federal Republic of 2017		0.50		2017		2027		32,500
1.25% Bonds of the Federal Republic of 2017		1.25		2017		2048		37,500

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Title	Interest rate		Year of issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
0.5% Bonds of the Federal Republic of 2018		0.50		2018		2028		28,500
0.25% Bonds of the Federal Republic of 2018		0.25		2018		2028		28,500
0.25% Bonds of the Federal Republic of 2019		0.25		2019		2029		29,500
0.00% Bonds of the Federal Republic of 2019		0.00		2019		2029		29,500
0.00% Bonds of the Federal Republic of 2019		0.00		2019		2050		39,500
0.00% Bonds of the Federal Republic of 2020		0.00		2020		2030		28,000
0.00% Bonds of the Federal Republic of 2020		0.00		2020		2035		23,750
0.00% Bonds of the Federal Republic of 2020		0.00		2020		2027		22,000
0.00% Bonds of the Federal Republic of 2020		0.00		2020		2030		33,500
0.00% Bonds of the Federal Republic of 2021		0.00		2021		2028		27,000
0.00% Bonds of the Federal Republic of 2021		0.00		2021		2031		28,000
0.00% Bonds of the Federal Republic of 2021		0.00		2021		2031		32,000
0.00% Bonds of the Federal Republic of 2021		0.00		2021		2036		25,750
0.00% Bonds of the Federal Republic of 2021		0.00		2021		2052		29,500
0.00% Bonds of the Federal Republic of 2022		0.00		2022		2032		31,000
1.70% Bonds of the Federal Republic of 2022		1.70		2022		2032		28,000
1.00% Bonds of the Federal Republic of 2022		1.00		2022		2038		21,500
2.10% Bonds of the Federal Republic of 2022		2.10		2022		2029		26,000
1.80% Bonds of the Federal Republic of 2022		1.80		2022		2053		26,000
2.30% Bonds of the Federal Republic of 2023		2.30		2023		2033		38,250
2.60% Bonds of the Federal Republic of 2023		2.60		2023		2033		30,500
2.40% Bonds of the Federal Republic of 2023		2.40		2023		2030		13,000
Total Federal Bonds								1,179,750

(1) Federal Bonds (Bundesanleihen) are evidenced by book entry, and no certificates are issued. Maturities are 7 to 30 years. No redemption prior to maturity; including principal strips.

2. GREEN FEDERAL BONDS (1)

Title	Interest rate		Year of issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
0.00% Green Bonds of the Federal Republic of 2020		0.00		2020		2030		9,500
0.00% Green Bonds of the Federal Republic of 2021		0.00		2021		2031		9,000
0.00% Green Bonds of the Federal Republic of 2021		0.00		2021		2050		10,000
2.30% Green Bonds of the Federal Republic of 2023		2.30		2023		2033		6,250
1.80% Green Bonds of the Federal Republic of 2023		1.80		2023		2053		5,500
Total Green Federal Bonds								40,250

(1) Federal Bonds (Bundesanleihen) are evidenced by book entry, and no certificates are issued. Maturities are 7 to 30 years. No redemption prior to maturity; including principal strips.

3. INFLATION-LINKED SECURITIES (1)

Title	Interest rate		Year of issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
0.50% Inflation-linked Bonds of the Federal Republic of 2014		0.50		2014		2030		22,150
0.10% Inflation-linked Bonds of the Federal Republic of 2015		0.10		2015		2026		19,200
0.10% Inflation-linked Bonds of the Federal Republic of 2015		0.10		2015		2046		14,250
0.10% Inflation-linked Bonds of the Federal Republic of 2021		0.10		2021		2033		10,650
Total Inflation-linked Securities								66,250

(1) Inflation-linked Securities (Inflationsindexierte Bundeswertpapiere) are evidenced by book entry, and no certificates are issued. Maturities are 5 to 30 years. No redemption prior to maturity.

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4. FEDERAL NOTES (1)

Title	Interest rate		Year of issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
0.00% Bonds of 2019-Series 179		0.00		2019		2024		23,500
0.00% Bonds of 2019-Series 180		0.00		2019		2024		22,500
0.00% Bonds of 2020-Series 181		0.00		2020		2025		23,000
0.00% Bonds of 2020-Series 182		0.00		2020		2025		27,500
0.00% Bonds of 2021-Series 183		0.00		2021		2026		28,000
0.00% Bonds of 2021-Series 184		0.00		2021		2026		24,000
0.00% Bonds of 2022-Series 185		0.00		2022		2027		22,000
1.30% Bonds of 2022-Series 186		1.30		2022		2027		30,000
2.20% Bonds of 2023-Series 187		2.20		2023		2028		25,000
2.40% Bonds of 2023-Series 188		2.40		2023		2028		29,500
Total Federal Notes								255,000

(1) Federal Notes (Bundesobligationen) are evidenced by book entry, and no certificates are issued. Maturities are approximately five years. No redemption prior to maturity.

5. GREEN FEDERAL NOTES (1)

Title	Interest rate		Year of issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
0.00% Green Bonds of 2020		0.00		2020		2025		7,500
1.30% Green Bonds of 2022		1.30		2022		2027		8,000
Total Federal Notes								15,500

(1) Federal Notes (Bundesobligationen) are evidenced by book entry, and no certificates are issued. Maturities are approximately five years. No redemption prior to maturity.

6. FEDERAL TREASURY NOTES (1)

Title	Interest Rate		Year of Issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
0.00% Notes of 2022		0.00		2022		2024		19,500
0.20% Notes of 2022 (II)		0.20		2022		2024		17,000
0.40% Notes of 2022 (III)		0.40		2022		2024		17,000
2.20% Notes of 2022 (IV)		2.20		2022		2024		16,000
2.50% Notes of 2023		2.50		2023		2025		17,500
2.80% Notes of 2023 (II)		2.80		2023		2025		17,500
3.10% Notes of 2023 (III)		3.10		2023		2025		17,000
3.10% Notes of 2023 (IV)		3.10		2023		2025		14,500
Total Federal Treasury Notes								136,000

(1) Federal Treasury Notes (Bundesschatzanweisungen) are evidenced by book-entry, and no certificates are issued. Maturities are two years. No redemption prior to maturity.

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7. TREASURY DISCOUNT PAPER (1)

	Interest Rate(2)		Year of Issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
Treasury Discount Paper		2.64 to 3.75		2023		2024		149,000

(1) Treasury Discount Papers (Unverzinsliche Schatzanweisungen) are issued at a discount and repaid at par value on the maturity date. No interest payments are made during the term of the paper. The papers are auctioned and intended for institutional investors. Currently, the initial maturity is twelve months. No redemption is permitted prior to maturity.

(2) Reflects annual interest rate paid to the holder by way of the initial issue discount. No redemption is permitted prior to maturity.

8. BORROWERS’ NOTE LOANS (1)

	Interest Rate		Year of Issue		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
Borrower’s note loans (Schuldscheindarlehen)		3.46 to 5.05		2003 to 2007		2024 to 2037		4,297

(1) Borrowers’ note loans (Schuldscheindarlehen) are an instrument of the German capital market where the lending entity, generally an institutional investor, receives a certificate evidencing its loan to the borrower and the term of such loans. The certificate generally authorizes at least three assignments. No redemption is permitted prior to maturity.

Source for Debt Table 1 to 8: Federal Republic of Germany – Finance Agency, “Einzelaufstellung aller Bundeswertpapiere seit 1995“ (https://www.deutsche-finanzagentur.de/downloadcenter).

9. OTHER LIABILITIES

Title	Interest Rate		Year of incurrence		Maturity		Aggregate principal amount outstanding as of December 31, 2023
	(% per annum)						(EUR in millions)
Old debt (1)		0.00 to 3.00		Various		Various		4,474

(1) Includes mainly equalization and covering claims of the Deutsche Bundesbank, other banks and insurance companies in connection with the currency reform of 1948 as well as liabilities of the Federal Government to repay amounts received from the Investitionshilfeabgabe, a special duty levied on income, the proceeds of which were to be used to promote investments.

Source: Bundesministerium der Finanzen, Monatsbericht Januar 2024, Table “Entwicklung der Kreditaufnahme des Bundes (Haushalt und Sondervermögen ohne Darlehensfinanzierung) im Dezember 2023”, page 74

(https://www.bundesfinanzministerium.de/Monatsberichte/2024/01/Inhalte/Kapitel-4-Wirtschafts-und-Finanzlage/4-4-kreditaufnahme-des-bundes-und-seiner-
sondervermoegen-pdf.pdf?__blob=publicationFile&v=4).

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II. GUARANTEESBYTHE FEDERAL GOVERNMENT (1)

	Aggregate principal amount outstanding as of December 31,
Purpose of Guarantees	2022		2021
	(EUR in millions)
Export finance loans (including rescheduled loans) (2)		119,102		128,049
Untied loans; direct foreign investments by German companies; Loans of the European Investment Bank to non-EU borrowers		39,723		35,133
Loans in connection market organization and stocking measures		0		0
Loans to domestic corporations and for projects in areas of agriculture, fishing and housing construction		341,605		267,997
Contributions to international financing institutions		75,512		75,493
Co-financing of bilateral projects of German financial co-operation		31,531		28,959
Successor agencies to Treuhandanstalt		1,009		1,009
Interest compensation guarantees		15,000		15,000
Total guarantees pursuant to the 2020 German Budget Act		623,483		551,640
Guarantee for a loan to Greece according to the German Financial Stability Act		22,400		22,400
Loan guarantees under the Act on Guarantees pertaining to the European Financial Stability Facility		90,317		89,412
Warranties in connection with the SURE-Warranty Act as of July 10, 2020		6,384		6,384
Total guarantees		742,584		670,586

(1) Does not include guarantees under the KfW Law with respect to money borrowed, bonds issued and derivative transactions entered into by KfW. For information relating to KfW’s borrowings, see “KfW—Business—Financial Markets—Funding.”

(2) Includes export finance loans extended by KfW IPEX-Bank guaranteed by the Federal Republic through HERMES, the official German export credit insurer. For information relating to loans extended by KfW IPEX-Bank benefiting from HERMES coverage, see “KfW—Business—Export and Project Finance (KfW IPEX-Bank)—Business.”

Source: Bundesministerium der Finanzen, Finanzbericht 2024, Overview 8.1.3, page 323 (https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/finanzbericht-2024.html).

III. LIABILITIESTO INTERNATIONAL FINANCIAL ORGANIZATIONS

The Federal Republic is obligated to contribute to the capital subscriptions and, in some cases, to additional financing, according to the requirements of each respective membership. Such contributions were in many cases stated initially in 1944 with one U.S. dollar being an equivalent to 0.888671 grams of gold, and later – with the creation of the Special Drawing Right (“SDR”) – being an equivalent to the SDR at the same value. The value of the SDR, the possible inclusion of new currencies in the basket, the initial weight of each of these currencies in the basket, and the financial instruments used in determining the interest rate on the SDR are reviewed every five years. With effect from August 1, 2022, the SDR basket consists of five currencies with the following initial weights: U.S. dollar (43%), Euro (29%), Chinese yuan (12%), Japanese yen (8%) and Pound sterling (7%).

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SUBSCRIPTIONSOR COMMITMENTSBYTHE FEDERAL REPUBLIC

TO INTERNATIONAL ORGANIZATIONSASOF ENDOF DECEMBER 2023

Name of organization	Subscription or commitment by the Federal Republic (1)		Amount paid in
	(USD in millions)
IMF (2)		37,277.2		37,277.2
International Bank for Reconstruction and Development (IBRD) (3)		14,304.7		1,043.5
International Development Association (IDA) (3)		30,624.96		30,624.96
International Finance Corporation (IFC) (3)		1,205.93		1,205.93
European Investment Bank (EIB) (4)		51,628.2		4,604.9
African Development Bank (AfDB) (3)		8150.1		402.9
African Development Fund (AfDF) (3)		5,453.5		5,000.7
Asian Development Bank (AsDB) (3)		6,161.0		308.1
Asian Development Fund (AsDF) (3)		2,002.0		1,892.0
Inter-American Development Bank (IDB) (3)		3,368.7		242.3
Inter-American Investment Corporation (IIC) (3)		24.4		24.4
Fund for Special Operations (FSO) (3)		—		—
International Fund for Agricultural Development (IFAD) (3)		794,537		76,972
Caribbean Development Bank (CDB) (3)		106.6		23.6
Special Development Fund of the Caribbean Development Bank (SDF) (3)		124.2		120.7
European Bank for Reconstruction and Development (EBRD) (4)(5)		3,204.6		589.2
Council of Europe Development Bank (CEB) (4)(6)		1,797.1		112.3
Asian Infrastructure Investment Bank (AIIB) (3)		4,484.2		896.8

(1) Subscriptions are in part committed in USD, SDR or EUR. SDR or EUR commitments are converted to USD at year-end exchange rates, except that certain SDR commitments are converted at the fixed conversion rate of SDR 1 = USD 1.39959.

(2) Quota in SDR: 26,634.4 Mio. SDR. Year-end value 2021 1 SDR = USD 1.399590. Source: computation provided by the Ministry of Finance based on data provided by the IMF; the subscription (quota) is fully paid in by the Deutsche Bundesbank. The foreign currency part of the quota (25% of the subscription) and the Deutsche Bundesbank’s further contributions to the IMF’s financing are part of the foreign currency reserves of the Deutsche Bundesbank. The government does not provide any guarantees or provisions for risks of IMF loans.

(3) Source: computation provided by the Ministry of Finance and the Ministry for Economic Cooperation and Development.

(4) Source: computation provided by the Ministry of Finance based on euro exchange rate of the European Central Bank of EUR 1 per USD 1.105 in effect on December 29, 2023.

(5) Capital increase pending completion. The Federal Republic committed to the subscription of new shares in an amount of EUR 343.6 million/USD 379.678 million.

(6) Capital increase pending completion. The Federal Republic committed to the subscription of new shares in an amount of EUR 710.6 million/USD 785.2 million.

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