Virus: Germany will again depart from its debt rules

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BERLIN, Germany | The German government will once again suspend its constitutional budgetary austerity rules in 2022 and will also have to take on more debt than expected in 2021, in the face of the persistence of the COVID-19 pandemic which is plaguing its economy, ministerial sources said on Monday. .

• Read also: All the developments of the pandemic

Germany plans to contract 81.5 billion euros in new loans in 2022, deviating, for the third year in a row, from its “debt brake” rule, which prohibits it from borrowing more than 0 , 35% of GDP each year.

For 2021, Berlin will contract 240.2 billion euros in new debt, a third more than initially expected in December. This amending budget will be presented to the Council of Ministers on Wednesday.

Until then, the German government had always assured that it wanted to return to budgetary rigor from 2022, after having suspended it in 2020 and 2021.

Berlin now wants to return to a balanced budget from 2023, with 8.3 billion euros in new debt.

At issue: the persistence of the health crisis in a country now affected by a third epidemic wave.

The budget forecasts had been established “on containment measures extending until January 10” with a progressive “normalization”, the sources told the press.

However, the recent rise in infections raises fears of a new turn of the screw: Chancellor Angela Merkel and the heads of the Länders meet on Monday on this subject.

The country, which has in particular closed non-essential businesses since December, will therefore have to continue its massive aid to the economy, which weighs on its budget.

Since the start of the crisis, Berlin has paid more than 114 billion euros in aid to its businesses, in the form of short-time working, guaranteed loans and direct aid.

The country embarked on a vast program of stimulus and so-called “future” investments last June to boost its economy, after the first wave of coronavirus.

Germany saw its investment spending jump from 38% in 2019 to 50.3 billion euros in 2020.

They could reach 61.9 billion euros in 2021. And the government does not intend to stop there: Berlin will release 200 billion euros more until 2025.

This spending has already pushed public debt to 75% of GDP in 2021, fifteen points higher than before the crisis.

The German government expects growth of 3% in 2021, and a return to a pre-crisis level “mid-2022”, after a plunge of 4.9% in 2020.

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