The country's central bank has announced that its reserves have been completely depleted following a staggering $20 billion loss in 2024

The German central bank has reported the largest financial loss since its establishment in 1957, attributing the record $20 billion deficit to soaring interest rates in the EU.

The European Central Bank (ECB) began its most aggressive rate-hiking cycle in July 2022, after Ukraine-related sanctions imposed on Russia sent gas prices skyrocketing and undermined most of the trade between Moscow and the bloc. The measures were designed to combat soaring inflation driven by runaway energy, fertiliser and grain prices.

A Bundesbank statement on Tuesday confirmed that its balance sheet for the past year reflects a deficit of 19.2 billion ($20.10 billion). Although the bank had warned of deficits for some time to come, the current loss has wiped out its reserves, meaning it won't be able to pay dividends to the German government.

"We expect not to be able to distribute profits for a long time," Bild has quoted Bundesbank President Joachim Nagel as saying.

Deficits are expected to persist in the coming years, though the Bundesbank anticipates that losses will be lower than in 2024.

The development comes as the EU's top economy suffers from a stubborn downturn. In 2024, the German economy contracted for a second straight year for the first time in more than two decades.

Official figures released last month showed that gross domestic product fell by 0.2% last year after dropping by 0.3% in 2023.

The Eurozone's largest economy has been falling behind its peers in recent years, largely due to a prolonged manufacturing downturn. The country's shift from affordable Russian gas to more expensive liquefied natural gas (LNG) from the US has driven up energy costs, severely affecting manufacturers and small businesses.