Germany may need more debt this year to cushion impact of war

Bloomberg

Germany’s federal government may need higher net borrowing on top of the 99.7 billion euros ($109 billion) already programmed for this year due to the uncertainty over the economic outlook caused by Russia’s invasion of Ukraine.
The country’s finance ministry is pursuing a supplementary budget to account for the potential impact of the war, according to two senior government officials, who asked not to be identified in line with briefing rules.
Together with the recently announced 100 billion-euro defense fund, which is not included in the regular federal budget, the country’s net borrowing is on track to reach nearly 200 billion euros in 2022 — the second-highest since the Second World War behind 2021. Chancellor Olaf Scholz’s cabinet is due on Wednesday to sign off on this year’s budget and the federal government’s
finance planning through 2026.
Those numbers could push even higher if Germany’s economic outlook worsens. A target for net borrowing in 2023 was also raised slightly to 7.5 billion euros, the officials said, but is still in line with constitutional rules limiting borrowing known as the “debt brake.”
Policy makers in Europe’s largest economy are trying to keep the recovery from the coronavirus pandemic afloat even as war in the Ukraine has caused already lofty energy and commodity prices to surge further.