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24 Mar 2021 | 10:58

German cabinet green lights additional budget with record-breaking new borrowings

(Sharecast News) - German Chancellor Angela Merkel's cabinet has approved the government's 2021 and 2022 budget plans, including the assumption of an extra €60.0bn in net debt for 2021 as part of an effort to help offset impacts stemming from the Covid-19 pandemic. The country's additional borrowing will take the annual total to over €240.0bn, with Germany spending freely in an attempt to support businesses hurt by coronavirus-related shutdowns as it still struggles to contain a third wave of cases linked to a more infectious variant.

In 2022, German finance minister Olaf Scholz, who will run as the Social Democrats' candidate for chancellor in Germany's September elections, said he was targeting net borrowing of €81.5bn, which would require a suspension of constitutional limits for a third straight year.

Germany's "debt brake" was designed to prevent net borrowing exceeding 0.35% of economic output, except in emergencies, while the 2021 total of €240.2bn made up roughly 7% of gross domestic product.

Scholz's financing plan through 2025, which was also approved in cabinet on Wednesday, targets restoration of the debt brake from 2023. The finance ministry was planning net new debt of €8.3bn in 2023, some €11.5bn in 2024 and €10.0bn in 2025. However, the final decision on the 2022 budget will be made by the administration that takes over Europe's largest economy after Merkel stands down following the nation's upcoming election.

Scholz will deliver further comments on his spending and borrowing plans at 1400 GMT.
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