BERLIN: The German cabinet on Wednesday approved Finance Minister Olaf Scholz’s draft budget for next year which envisages net new debt of 96.2 billion euros ($112.43 billion) to finance further measures to tackle the coronavirus crisis, an official said.
The additional borrowing marks the second-highest amount of net new debt in Europe’s largest economy since the end of World War Two and comes after the government already took on record high borrowing of some 218 billion euros this year.
The budget underlines Scholz’s determination to move Germany further away from its former image as Europe’s austerity champion and secure Berlin’s new role as the biggest spender in the euro zone’s struggle to recover from the coronavirus shock.
The fiscal plans require Germany to suspend its constitutionally enshrined debt limits in 2021 after parliament already abandoned them this year.
From 2022 onwards, Germany plans to stick to its debt brake rules again, limiting borrowing to a tiny fraction of gross domestic product.
The government’s mid-term fiscal plans envisage net new debt of 10.5 billion euros in 2022, 6.7 billion euros in 2023 and 5.2 billion euros in 2024. This means Germany is not planning to return to its ultra-prudent fiscal policy of keeping a balanced budget. ($1 = 0.8557 euros)