Germany to take on €70 billion more in new debt than expected in 2021

Germany to take on €70 billion more in new debt than expected in 2021
Finance Minister Olaf Scholz speaking on Sunday in Berlin. Photo: DPA
Germany plans to take on €166 billion in new debt next year, according to a draft bill seen by AFP, as measures to curb the second wave of the pandemic eat into government coffers.

Borrowing in Europe's largest economy in 2021 will rise by €69.9 billion more than previously announced, further shattering Germany's constitutionally enshrined debt brake rule, the draft legislation said.

In September, Finance Minister Olaf Scholz said that Germany would take on new debt of €96.2 billion next year.

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But an “extension of corona support”, including through prolonging a short-time working scheme to mid-2021, will boost spending, the report said.

A final decision will be taken by the budget committee in a meeting on Thursday, before being voted on by the German parliament.

Additional costs may need to be added if the country's current curbs shuttering leisure venues and sports facilities as well as limiting restaurants to takeaways are extended past November.

Other industries including in retail and manufacturing have been allowed to stay open.

The government promised an additional €10 billion in support of sectors specifically hit by the November measures, which Chancellor Angela Merkel dubbed “lockdown light”.

The chancellor is expected to take stock of the measures and discuss extensions or further curbs at a meeting with regional leaders of Germany's 16 states on Wednesday.

“What will be discussed on Wednesday must be taken into account afterwards,” a finance ministry spokesperson said.

The impact of the pandemic has forced Merkel's government to temporarily abandon its years-long dogma of a running a balanced budget.

Berlin is expected to borrow €218 billion in 2020, after the government pledged more than a trillion euros to shield German workers and companies from the virus fallout.

Estimates for 2020 tax revenues were ticked up earlier this month to around €278 billion — €3.4 billion more than predicted, but still more than €50 billion below 2019.

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