German Cabinet approves 2022 budget plan with more new debt

AP Health

Surrounded by guards German Chancellor Angela Merkel, center, leaves the German parliament Bundestag after the answers questions from lawmakers in Berlin, Germany, Wednesday, March 24, 2021. (AP Photo/Markus Schreiber)

BERLIN (AP) — Germany’s Cabinet on Wednesday approved 2022 budget plans that will see rules against running up new debt suspended for the third consecutive year as the government seeks to help Europe’s biggest economy recover from the coronavirus pandemic.

The government foresees spending of 419.8 billion euros ($499 billion) next year, down from 547.7 billion euros this year. Finance Minister Olaf Scholz’s plans call for new borrowing of 81.5 billion euros in 2022, compared with 240.2 billion euros this year.

Scholz said Germany is “paving the way for growth with record investment in climate protection and digitalization.”

“The figures show that our aid policy is working,” he said of the support packages that have been put together to help struggling businesses.

After six years in the black, Germany resorted to running up new debt in 2020 to help cover the cost of support and stimulus packages and an expected shortfall in tax revenue.

The country’s so-called debt brake was suspended to allow up to 217.8 billion euros in new borrowing last year. Eventually, Germany borrowed only 130.5 billion euros; the economy suffered less badly than expected, declining by 4.9% — still a better outcome than in several other European countries.

The “debt brake,” introduced a decade ago, allows new borrowing to the tune of only 0.35% of annual gross domestic product, though it can be suspended to deal with natural disasters or other emergencies that are out of the state’s control.

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