Germany plans nearly 180 billion euros in new debt for 2021

© Reuters.

BERLIN (Reuters) – Germany plans to borrow almost 180 billion euros ($214.60 billion) next year, nearly double the amount initially foreseen, as Berlin extends aid measures to mitigate impact of the COVID-19 pandemic on Europe’s biggest economy, lawmakers told Reuters on Friday.

Germany’s parliamentary budget committee of lawmakers agreed on the plans in the early hours of Friday after 17 hours of talks, saying it is the second largest amount of net new borrowing in the history of post-war Germany.

“The new borrowing is the right thing to do. You cannot save your way through a crisis,” said Greens lawmaker Sven-Christian Kindler.

Planned new debt of 179.82 billion euros for next year compares to 96 billion euros initially envisaged by Finance Minister Olaf Scholz in September.

Chancellor Angela Merkel’s government has taken unprecedented steps to help companies and small businesses get through the crisis, freeing up billions of euros to prevent the economy shrinking further. To fund the measures, it needs to borrow more than planned.

Parliament this year suspended Germany’s debt brake in the constitution to allow the government to take on net new debt of up to 218 billion euros to finance rescue and stimulus measures. However, coalition sources have said it was unlikely to need the full amount.

Merkel’s government expects the economy to shrink by a calendar-adjusted 5.9% in 2020 and rebound by 4.4% in 2021.

Merkel and state premiers agreed on Wednesday to extend and tighten a partial coronavirus lockdown which will see bars, restaurants, gyms and entertainment venues stay shut until at least Dec. 20.

Financial support for businesses that have been closed since Nov. 2 due to the pandemic will be extended.

($1 = 0.8388 euros)

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