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AFP
January 27, 2021

Row as Merkel ally moots easing ‘debt brake’ for years

World

AFP
January 27, 2021

BERLIN: A call by Chancellor Angela Merkel’s chief of staff on Tuesday to allow further extensive borrowing to help bankroll a post-pandemic recovery has sparked a major ruckus ahead of general elections.

Helge Braun argued that Germany should abandon its fiscal discipline—enshrined in the constitution as a rule dubbed the “debt brake”—for a few years to help dig the country out of a deep recession caused by the coronavirus pandemic.

But his suggestion immediately ran into fierce opposition from within Merkel’s conservative CDU-CSU alliance. Her spokesman Steffen Seibert moved to distance the government from what he described as Braun’s “personal opinion”, according to German media.

The “debt brake” forbids the government from borrowing more than 0.35 percent of gross domestic product (GDP) in a year. But with entire sectors idled to halt the spread of Covid-19, Merkel’s government has stepped in with over a trillion euros in aid and stimulus to tide over companies and employees.

To fund the help, Germany was forced to lift its “debt brake” for 2020 and 2021. Braun, chief of staff at the chancellery, said it will take a few more years before Germany can report a balanced budget again.

“The ‘debt brake’ cannot be complied with in the coming years, even with strict spending discipline,” Braun wrote in a commentary for the Handelsblatt business daily.

It would “make sense to combine a recovery strategy for the economy in Germany with a change in the Basic Law”, he said, referring to the constitution.

The amendment should prescribe a gradual return to compliance with the debt rule “with a clear date”, he said.