Germany Borrows $34 Billion More This Year to Pay for Stimulus

(Bloomberg) -- German Finance Minister Olaf Scholz is planning to raise more debt this year and next to help pay for the government’s massive stimulus program.

Scholz will propose to raise debt by at least 30 billion euros ($33.9 billion) in a supplement to this year’s budget that will require parliamentary approval, according to people familiar with the discussion. Further borrowing will be necessary next year as well to help offset weaker tax revenues and pay for growth measures, said the people, asking not to be named because the plans aren’t public.

Chancellor Angela Merkel’s coalition agreed this week on a sweeping 130 billion-euro stimulus package to spur short-term consumer spending, and get businesses to invest again.

Scholz has been trying to downplay concerns by Merkel’s ruling Christian Democratic party over the amount of debt the rescue plan will generate. On Thursday he said that financing needs are manageable and that the government can fall back on a surplus fund of 40 billion euros as well as debt authorized in March but not yet fully used.

Still, Germany’s new borrowing requirements mark an extraordinary about-turn from years of fiscal discipline that produced balanced budgets. In March parliament had already approved extra debt of 156 billion euros as part of a supplementary budget request.

The new borrowing requirements had previously been reported by Spiegel news magazine, which said that the government’s overall new debt this year would rise to more than 180 billion euros.

Gross domestic product is expected to contract by 6.3% this year.

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