BERLIN (Reuters) - Chancellor Angela Merkel’s chief of staff opened the door for continued deficit spending on Tuesday with a proposal to change Germany’s debt issuance law, because the government won’t be able to stick to the strict limits on borrowing for several more years.
Parliament suspended the law, enshrined in the constitution and normally restricting new federal borrowing to 0.35% of economic output, for 2020 and 2021 because of the COVID-19 pandemic.
Helge Braun’s comments, in an op-ed piece for business newspaper Handelsblatt, hinted strongly at moves within the government to carry on spending more freely once the coronavirus crisis - during which it has propped up the economy with unprecedented support packages - is over.
“The debt brake cannot be adhered to in the coming years even with otherwise strict spending discipline,” Braun wrote.
Braun suggested lawmakers should allow more debt to be issued for a several more years, but there should be a “clear date” for the rule to kick back in again.
A government spokesman called the comment Braun’s personal opinion contributing to the wider debate, while several senior conservatives disapproved of it.
Eckhardt Rehberg, spokesman on budget issues for Merkel’s CDU party in the lower parliamentary house, said its lawmakers continued to support the debt brake and viewed fiscal sustainability as non-negotiable.
“The cause of the euro zone crisis was not too little but too much debt,” Rehberg said, adding that limiting public debt was also a matter of fairness towards the next generation.
Markus Soeder, leader of its Bavarian CSU affiliate, told Die Welt newspaper any “permanent” suspension of the debt brake would send the wrong signal.
Finance Minister Olaf Scholz, who is running as the Social Democrat (SPD) candidate for chancellor at elections in September, neither embraced nor rejected the proposal, saying there were several ways how to address future budget challenges.
But Scholz did not repeat earlier remarks that he wanted to comply with the debt brake rule in 2022. Instead, he made clear he would continue to reject cuts in social welfare and that he wanted to keep public investments at record levels.
Berlin took on net new debt of 130.5 billion euros ($158.3 billion) in 2020, the highest annual borrowing in its post-war history, and Scholz plans to increase that to up to 180 billion euros this year.
Sven-Christian Kindler, chief budget lawmaker of the opposition Greens, said a reform of the debt brake to increase public investment was long overdue.
Polls suggest the Greens are on course to become the conservatives’ junior coalition partner following elections in September, when Merkel will stand down as chancellor.
Scholz will present a proposal for next year’s federal budget in March, but the final say on its composition will go to the parliament and coalition government that emerge following the election.
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