Chancellor Angela Merkel’s cabinet signed off on plans to raise another 62.5 billion euros ($70 billion) in debt to finance the country’s largest stimulus program in recent history.
The proposal has yet to be approved by parliament and would increase net borrowing to 218.5 billion euros this year. In March the Bundestag, or lower house, had already authorized a debt increase of 156 billion euros.
After years of fiscal discipline that earned Germany scorn and admiration alike, debt had fallen from over 80% of gross domestic product in the wake of the 2008 financial crisis to around 60%. Now it is again projected to rise to 77% of GDP. “It’s the right amount, any less wouldn’t have been enough,” Finance Minister Olaf Scholzsaid in a news conference following the cabinet meeting. “It’s manageable.”
Germany’s budget has a sufficient buffer for the government to respond to a possible second wave of the pandemic should it be necessary, but that a renewed spike in the infection rate wouldn’t produce a similar lockdown as that in March, Scholz said.
Separately Merkel will meet with the premiers of Germany’s 16 states on Wednesday to discuss remaining social distancing rules as well as testing strategies. Local media reported the state premiers and Merkel could agree to extend a ban on big events, such as concerts and fairs, until late October.