* Negative yields push down overall debt servicing costs * ECB bond buys increase fiscal space for German government * Berlin seizes opportunity with record new borrowing (Adds details, background) BERLIN, Dec 15 (Reuters) - Germany earned more than 7 billion euros ($8.51 billion) from issuing new bonds this year as negative interest yields pushed down Berlin’s overall debt servicing costs to record lows, a finance ministry document showed on Tuesday. The windfall is mainly due to “historically very low interest rates”, Deputy Finance Minister Bettina Hagedorn wrote in a letter to opposition lawmaker Fabio De Masi following a parliamentary request. The average yield on new German bonds issued until end of November was -0.56 percent, resulting in revenues of 7.07 billion euros, according to the finance ministry document. Government sources told Reuters in September that Berlin expected its debt servicing costs to more than halve and reach a record low this year, despite the government’s decision to borrow more than ever before to finance rescue measures in the COVID-19 pandemic. The lower-than-expected borrowing costs are enabled by the European Central Bank’s loose monetary policy and Germany’s international reputation as a fiscally reliable country, resulting in negative interest rates even for longer maturities. “Thanks to the negative yields, the state is actually earning money by selling bonds,” De Masi said. “German government bonds simply sell like hot cakes. Investors can’t get enough of them.” The book value of German bonds acquired by the ECB through its Public Sector Purchase Programme (PSPP), which includes federal securities as well as bonds of the federal states and public institutions such as the KfW bank, stood at 562 billion euros as of end October, the document showed. In addition, the ECB bought German bonds as part of its new Pandemic Emergency Purchasing Program (PEPP) worth more than 125 billion euros as of end September. The combined sum of 687 billion euros compared with a book value of the PSPP portfolio of roughly 528 billion euros at the end of 2019. The PEPP program did not even exist then. “The ECB is doing its job and is keeping interest rates low for all euro zone countries,” De Masi said, adding that Germany’s debt-to-GDP ratio of around 70% was still below the level reached at the height of the global financial crisis. “We can reduce the debt burden with growth. It would be madness to return to the fiscal rules of the debt brake,” he added. ($1 = 0.8226 euros) (Reporting by Rene Wagner and Michael Nienaber Editing by Thomas Seythal and Raissa Kasolowsky)