Merkel’s Cabinet Approves Plans to Ramp Up German Borrowing

German Chancellor Angela Merkel’s cabinet approved the government’s budget plans for this year and next, including an extra 60 billion euros ($71 billion) in net debt for 2021 to help offset the impact of the coronavirus.

The additional borrowing this year takes the total to more than 240 billion euros, as Germany spends freely to support businesses affected by the pandemic shutdown. In 2022, Finance Minister Olaf Scholz is targeting net borrowing of 81.5 billion euros, requiring a suspension of constitutional limits for a third straight year.

Germany’s so-called “debt brake” is designed to prevent net borrowing exceeding 0.35% of economic output, except in emergencies, and the total for this year of 240.2 billion euros amounts to about 7% of gross domestic product.

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Scholz’s financing plan through 2025, also approved Wednesday in cabinet, foresees a restoration of the debt brake from 2023. The final decision on next year’s budget will be taken by the government that takes charge of Europe’s biggest economy after Merkel steps aside following September’s election.

Scholz is due to give a news conference on his spending and borrowing plans at 1 p.m. in Berlin.

©2021 Bloomberg L.P.

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