German Finance Minister Olaf Scholz plans to take on net new debt of around 100 billion euros ($117.92 billion) next year to sustain Berlin’s fight against the coronavirus pandemic, four people familiar with the matter told Reuters on Thursday.
The plans underline an increased readiness in Berlin to boost borrowing after a source told Reuters earlier this month that Scholz had initially been eyeing additional debt of at least 80 billion euros in his draft 2021 budget.
The pandemic plunged Europe’s largest economy into its deepest recession on record in the first half of the year. Berlin unleashed an unprecedented array of rescue and stimulus measures, financed with record new borrowing of some 218 billion euros, to help companies and consumers through the crisis.
Scholz said in a Reuters interview last week that he was planning to take on substantial additional debt next year to finance further measures and sustain the recovery, but declined to give an exact figure.
Four people familiar with the draft budget said on condition of anonymity that Scholz was eyeing net new debt of at least 95 billion euros. Two of them ruled out the possibility of it exceeding 100 billion euros.
The step would require another suspension of Germany’s constitutionally enshrined debt limits after Berlin already abandoned them this year. Scholz is determined to stick to the fiscal rules from 2022 onwards, which would allow net new debt but to a lesser extent.
The plans also highlight 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 COVID-19 outbreak.
Scholz is expected to present the draft budget and his debt plans for 2021 next Wednesday. Lawmakers will debate the package and have to approve it by December.
Editing by Michelle Adair