German Lower House Approves $218 Billion Debt in 2021 Budget

Germany’s lower house of parliament approved a budget for next year that allows new borrowing of up to 180 billion euros ($218 billion) to help finance pandemic-related spending.

Chancellor Angela Merkel’s administration nearly doubled the debt it had projected earlier this year as it extended additional financial aid to companies to help offset the fallout from a pandemic that has become more fierce than in the spring.

Daily coronavirus cases and deaths on Friday rose the most since the outbreak began, making tougher restrictions more likely. Several economists have said a short, hard lockdown would not only be better for the fight against the virus, but also for the economy.

Already a growing number of states are moving to shut down retailers and extend school holidays.

The 2021 budget foresees spending of almost 500 billion euros and investments of about 62 billion euros, underscoring the government’s decision to loosen the public purse strings after years of running balanced budgets. A partial lockdown, which closed bars, gyms and cinemas but kept schools and most other businesses open, is costing the government at least 15 billion euros a month.

Finance Minister Olaf Scholz has previously said the government won’t need to tap anywhere near the full amount in 2020, and that total new debt for this year and next will come to a little over 300 billion euros.

In the debate leading up to the vote in the Bundestag, the right-wing opposition party AfD criticized the extent of new borrowing, suggesting political motives ahead of parliamentary elections next September in which Scholz is running for the Social Democracts to replace Merkel.

©2020 Bloomberg L.P.

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