Germany Extends Financial Assistance to Offset Hit From Pandemic

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Germany agreed to further support companies and citizens hit by the fallout from the coronavirus pandemic, without adding to strains on the government’s finances.

At a meeting late Wednesday, senior officials in Chancellor Angela Merkel’s ruling coalition signed off on measures including increasing the amount of losses a company can write off against tax to as much as 20 million euros ($24 million), as well as a child-benefit bonus and an extension to a lower sales-tax rate for restaurants.

Finance Minister Olaf Scholz said the aid programs can be financed from money already set aside in the federal budget.

“Parliament has approved a very significant amount of budget funds, and we’re trying to use this money very carefully,” Scholz said Thursday in an interview with Deutschlandfunk radio. “There is space in the finance plan that allows us to make these decisions.”

Scholz -- who is running as the chancellor candidate for the Social Democrats in September’s national election -- cautioned that there is a degree of uncertainty around Germany’s budget planning for next year.

“Of course everything depends on how the pandemic develops and whether we can sufficiently stabilize the economy,” he said. “With the measures we have taken up to now, we have been successful in that area.”

Germany’s vice chancellor left open whether the federal government will need to ask parliament for permission to suspend constitutional rules limiting new borrowing for a third year in 2022.

“We’ll have to mobilize additional financing possibilities if we don’t want to make totally wrong decisions,” Scholz said, adding he would be against cutting social and health spending.

©2021 Bloomberg L.P.

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