Germany Says Budget Change Possible to Counter Slump; Bunds Fall

(Bloomberg) --

Germany’s plans to run balanced budgets through 2023 could be reviewed if economic conditions change, according to the finance ministry. The euro rose on the news.

“Should there be a need for adjustment because of overall economic developments or external factors, it will be decided in the context of the budget planning and taking the coalition agreement into account,” Bettina Hagedorn, a deputy finance minister, wrote to a lawmaker in a letter obtained by Bloomberg News.

German bonds extended declines on the news, which some investors interpreted as increasing the chances of a government stimulus package to revive growth. The euro rose to a fresh session high. The finance ministry confirmed the authenticity of the letter but declined to comment further.

With a potential recession looming, business leaders and an increasing number of mostly center-left politicians have urged Chancellor Angela Merkel to boost investment and increase debt. The Bundestag, Germany’s lower house of parliament, on Tuesday begins debating the 2020 budget, with Finance Minister Olaf Scholz due to speak at 10 a.m. in Berlin.

Scholz has so far resisted calls for Germany to take advantage of historically low borrowing costs and issue new debt, though the pressure will increase if Europe’s biggest economy slips into recession in the current quarter.

Separately, Reuters reported that Germany is considering a “shadow budget” to boost investment beyond restrictions imposed by national debt rules.

To contact the reporter on this story: Birgit Jennen in Berlin at bjennen1@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Raymond Colitt, Iain Rogers

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