Merkel’s cabinet okays plans to ramp up German borrowing

Bloomberg

German Chancellor Angela Merkel’s cabinet approved the government’s budget plans for this year and next, including an extra 60 billion euros ($71 billion) in net debt for 2021 to help offset the impact of the coronavirus.
The additional borrowing this year takes the total to more than 240 billion euros, as Germany spends freely to support businesses affected by the pandemic shutdown. In 2022, Finance Minister Olaf Scholz is targeting net borrowing of 81.5 billion euros, requiring a suspension of constitutional limits for a third straight year.
Germany’s so-called “debt brake” is designed to prevent net borrowing exceeding 0.35% of economic output, except in emergencies, and the total for this year of 240.2 billion euros amounts to about 7% of gross domestic product.
Scholz’s financing plan through 2025, also approved Wednesday in cabinet, foresees a restoration of the debt brake from 2023. The final decision on next year’s budget will be taken by the government that takes charge of Europe’s biggest economy after Merkel steps aside following September’s election.
Meanwhile, Chancellor Angela Merkel dropped plans for a five-day Easter shutdown amid massive criticism in the latest setback for Germany’s pandemic fight.
Merkel backed off the proposal in a hastily-arranged video conference with the heads of Germany’s 16 states.
The meeting comes after marathon talks earlier this week, with Easter lockdown catching state officials off guard and creating confusion over the implementation.
Germany has struggled to lay out a clear plan to contain the disease. Existing measures were extended until April 18, but no new concrete steps were agreed after more than 11 hours of tense discussions between Merkel and state leaders.
With infections surging amid a sluggish ramp-up of vaccinations, public frustration over the government’s handling of the crisis is growing just six months before a national election.
Merkel’s conservative bloc — also struggling with a scandal over lawmakers profiting off the pandemic — has tumbled in the polls. Its lead over the second-placed Greens narrowed to 8 percentage points this week, according to a polling average calculated by Bloomberg.
Amid the political confusion, hospitals are again filling up with Covid-19 patients as the third wave of the disease takes hold even before the second completely receded, according to the head of the country’s intensive- and emergency-care association.
There are 3,159 Covid patients in intensive care in Germany, the highest in more than a month and pushing the occupancy rate to over 85%, according to DIVI’s latest estimate published Tuesday.
“We are starting from a very high level,” the group’s president, Gernot Marx, said in an interview with Deutschlandfunk radio. “This is a matter of great concern,” he said, adding that he hoped the decision to enter a hard lockdown over Easter will prevent the health system from becoming overwhelmed.