Germany to borrow $350bn, mashing debt rule

29 November, 2020 12:00 AM printer

FRANKFURT AM MAIN: Germany, traditionally opposed to public debt, will borrow more than 300 billion euros to help workers and companies weather a deep economic slump sparked by the coronavirus pandemic.

The sum is to be spread out over 2020 and 2021.

Among the fresh aid announced Friday was 18 billion euros ($21 billion) for companies and the self-employed in December, as restrictions that shut the gastronomy, travel and cultural sectors in Europe's largest economy are to continue into January, reports AFP.

"It costs a lot of money, but the alternative of a wave of bankruptcies and layoffs would be even more expensive for all of us," Finance Minister Olaf Scholz said.

The parliamentary finance committee approved a total of 179.8 billion euros in borrowing for next year, according to a final document seen by AFP.

Germany originally said it would borrow 218 billion euros in 2020, after the government pledged more than a trillion euros to shield German workers and companies from the virus fallout.

However, Scholz said that this year's borrowing would not reach that level, as aid packages in November and December will be accounted for in the following year's budget.

It means new debt in 2020 will be much less than expected, Scholz said.

The impact of the pandemic has forced Chancellor Angela Merkel's government to temporarily abandon its tradition of a running a balanced budget.

Public spending will reach nearly 500 billion euros in 2021, as the government continues to support the economy through the health crisis.

Borrowing for the coming year will be nearly 84 billion euros more than the finance ministry forecast in September, before the arrival of a second wave of Covid-19.

Germany entered a new round of curbs in November that closed restaurants and bars, as well as the tourism, leisure and culture sectors.

Merkel on Wednesday announced the extension of these measures past Christmas unless coronavirus case numbers come down dramatically.

With an eye on industries hit hardest by ongoing restrictions, Scholz pledged to boost aid to the culture and travel industries.

The government expects to return to its "debt brake" of net-zero new borrowing in 2022, in the hope that by then the economy will have returned to pre-crisis levels.

Berlin expects the economy to shrink by 5.5 percent this year, before rebounding by 4.4 percent next year.

Parliament is to reconvene on December 7 to approve the budget.


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