On Wednesday, the German government approved the draft budget submitted by Finance Minister Olaf Scholz, for next year, which expects a new net debt of 96.2 billion euros ($ 112.6 billion) to finance more measures to combat the Coronavirus crisis.
The additional borrowing represents the second-highest net debt volume in the largest European economy since the end of World War Two and comes after government borrowing reached a record high of around 218 billion euros this year.
“We protect the health of citizens, support the economy, and provide job opportunities,” Schultes said, adding that “the Covid-19 pandemic is not nearing its end, so the government should not be complacent in its efforts”.
This budget highlights Scholz’s determination to distance Germany more from its previous image as the most austere country in Europe and to confirm Berlin’s new role as the largest spender in the Eurozone to recover from the shock caused by the Coronavirus epidemic.
According to these fiscal plans, Germany should suspend the debt limits stipulated in the constitution during 2021 after parliament had already ignored them this year.
Germany intends to return to debt restrictions again in 2022 and reduce borrowing to a fraction of GDP.
Germany expects the debt rate to jump to about 75 percent of GDP in 2020 from less than 60 percent in 2019 and then remain at that level in 2021 as the economy is expected to recover strongly.