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ECONOMY

Row breaks out over call to ease Germany’s ‘debt brake’ for years

A call by Chancellor Angela Merkel's chief of staff on Tuesday to allow further extensive borrowing to help bankroll a post-pandemic recovery has sparked a major ruckus ahead of general elections.

Row breaks out over call to ease Germany's 'debt brake' for years
Merkel and Braun at a cabinet meeting on Monday. Photo: DPA

Helge Braun argued that Germany should abandon its fiscal discipline — enshrined in the constitution as a rule dubbed the “debt brake” — for a few years to help dig the country out of a deep recession caused by the coronavirus pandemic.

But his suggestion immediately ran into fierce opposition from within Merkel’s conservative CDU-CSU alliance. Her spokesman Steffen Seibert moved to distance the government from what he described as Braun’s “personal opinion”, according to German media.

The “debt brake” forbids the government from borrowing more than 0.35 percent of gross domestic product (GDP) in a year.

But with entire sectors idled to halt the spread of Covid-19, Merkel’s government has stepped in with over a trillion euros in aid and stimulus to tide over companies and employees.

To fund the help, Germany was forced to lift its “debt brake” for 2020 and 2021.

Braun, chief of staff at the chancellery, said it will take a few more years before Germany can report a balanced budget again.

READ ALSO: ‘Doing nothing would be more expensive’: Germany to take on debt again in 2021

“The ‘debt brake’ cannot be complied with in the coming years, even with strict spending discipline,” Braun wrote in a commentary for the Handelsblatt business daily.

It would “make sense to combine a recovery strategy for the economy in Germany with a change in the Basic Law”, he said, referring to the constitution.

The amendment should prescribe a gradual return to compliance with the debt rule “with a clear date”, he said.

The move should be viewed as a “strategic decision for economic recovery,” added Braun, who is a close ally of Merkel.

By offering more flexibility on debt, the government would be able to hold off on hikes in taxes or social charges, he argued.

Braun stressed however that Europe’s biggest economy must return gradually to its limits on new debt once the recovery is on track.

‘Sceptical’

Markus Söder, who heads Merkel’s sister party CSU, said he was “sceptical” about Braun’s suggestion.

“We cannot solve the economic consequences of the pandemic in the long term with higher debt or higher taxes,” he told Die Welt daily.

“A coherent economic concept is needed. Germany stands for financial seriousness and we should stay that way,” added Söder, who has been touted as a possible successor to Merkel in Germany’s top job following elections on September 26th.

The CDU’s new leader Armin Laschet also stressed in a meeting with CDU lawmakers that his party holds firm to the no-new-debt rule, according to German media quoting sources at the talks.

Earlier, Eckhardt Rehberg, the spokesman on budgetary matters for CDU-CSU lawmakers, had said that “solid public finances are non-negotiable” for the parliamentary group.

Like Seibert, Rehberg rejected Braun’s suggestion as his “own personal opinion”, saying his group “stands firmly by the debt brake in the Basic Law.”

The German economy suffered its biggest contraction in 2020 since the 2009 financial crash because of the pandemic, although the decline was smaller than the slumps seen in other European countries.

Official forecasts predict that Germany will return to growth in 2021 after output shrank 5.0 percent last year, but clouds are darkening as the virus has shown no signs of loosening its deadly grip on Europe.

A new round of shutdowns of restaurants and sporting and leisure facilities first imposed in November and then expanded to include schools and most shops in mid-December is now set to last until mid-February.

But with virus variants first seen in Britain and South Africa that are feared to be more contagious, Merkel’s government has warned that easing restrictions too early could lead to a rapid flare-up in infections.

Economy Minister Peter Altmaier is to present the latest growth forecasts for 2021 on Wednesday, with local media reporting that the expected 4.4 percent gain for this year may be shaved to 3.0 percent.
 

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HEALTH

Could there be a new wave of Covid-19 in Germany this autumn?

It’s back again: amid sinking temperatures, the incidence of Covid-19 has been slowly rising in Germany. But is this enough to merit worrying about the virus?

Could there be a new wave of Covid-19 in Germany this autumn?

More people donning face masks in supermarkets, friends cancelling plans last minute due to getting sick with Covid-19. We might have seen some of those familiar reminders recently that the coronavirus is still around, but could there really be a resurgence of the virus like we experienced during the pandemic years?

According to virologists, the answer seems to be ‘maybe’: since July, the number of people newly infected with Covid-19 has been slowly rising from a very low level.

According to the Robert Koch Institute (RKI), nine people per 100,000 inhabitants became newly infected in Germany last week. A year ago, there were only around 270 reported cases.

Various Corona variants are currently on the loose in the country. According to the RKI,  the EG.5 (also called Eris) and XBB.1.16 lines were each detected in the week ending September 3rd with a share of just under 23 percent. 

The highly mutated variant BA.2.86 (Pirola), which is currently under observation by the World Health Organisation (WHO), also arrived in the country this week, according to RKI. 

High number of unreported case

The RKI epidemiologists also warned about a high number of unreported cases since hardly any testing is done. They pointed out that almost half of all registered sewage treatment plants report an increasing viral load in wastewater tests.

The number of hospital admissions has also increased slightly, but are still a far cry from the occupation rate amid the pandemic. Last week it was two per 100,000 inhabitants. In the intensive care units, only 1.2 percent of all beds are occupied by Covid-19 patients.

Still, a good three-quarters (76.4 percent) of people in Germany have been vaccinated at least twice and thus have basic immunity, reported RKI. 

Since Monday, doctors’ offices have been vaccinating with the adapted vaccine from Biontech/Pfizer, available to anyone over 12 years old, with a vaccine for small children set to be released the following week and one for those between 5 and 11 to come out October 2nd.

But Health Minister Karl Lauterbach has so far only recommended that people over 60 and those with pre-existing conditions get vaccinated.

READ ALSO: EXPLAINED: Who should get a Covid jab this autumn in Germany?

“The pandemic is over, the virus remains,” he said. “We cannot predict the course of coming waves of corona, but it is clear that older people and people with pre-existing conditions remain at higher risk of becoming severely ill from Covid-19”

The RKI also recommended that people with a cold voluntarily wear a mask. Anyone exhibiting cough, cold, sore throat or other symptoms of a respiratory illness should voluntarily stay at home for three to five days and take regular corona self-tests. 

However, further measures such as contact restrictions are not necessary, he said.

One of many diseases

As of this autumn, Covid-19 could be one of many respiratory diseases. As with influenza, there are no longer absolute infection figures for coronavirus.

Saarbrücken pharmacist Thorsten Lehr told German broadcaster ZDF that self-protection through vaccinations, wearing a mask and getting tested when symptoms appear are prerequisites for surviving the Covid autumn well. 

Only a new, more aggressive mutation could completely turn the game around, he added.

On April 7th of this year, Germany removed the last of its over two-year long coronavirus restrictions, including mask-wearing in some public places.

READ ALSO: German doctors recommend Covid-19 self-tests amid new variant

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