Germany is Preparing a Debt Supplement of More than 60 Billion Euros

Germany is reportedly working on a debt-financed supplementary budget of more than 60 billion or $71 billion, according to Reuters. The debt will push up net new borrowing to a record of over 240 billion euros this year due to the Covid-19 pandemic.

• Germany’s massive fiscal push is needed because of a longer-than-expected coronavirus lockdown.
• Finance Minister Olaf Scholz is expected to present the supplementary budget for this year and the fiscal framework for 2022 next Wednesday.
• Last year, the federal government took on net new debt of 130 billion euros, the highest annual new borrowing on record.
• The supplementary budget comes on top of the initially planned net new borrowing of some 180 billion euros.
• To allow the deficit spending, parliament suspended the constitutional debt break for 2020 and 2021, limiting net new borrowing to 0.35% of GDP.
• Scholz plans to use the budget emergency clause also next year, with officials still working on the volume and details of the 2022 draft budget.
• Scholz could also suggest a fiscal framework with annual net new borrowing of up to 80 billion euros for next year.

German stocks are currently declining. DAX is down 0.96%