To finance social spending and stimulate the post-Covid-19 economic recovery, the German government plans to raise more than €96 billion of new debt in 2021, giving up its brake on public debt next year as well, according to the draft budget it unveiled on Wednesday 23 September.
Nevertheless, the situation of public finances remains under control: after having been below 60% of national GDP in 2019, “the debt ratio will rise to around 75% of GDP in 2020 and a further increase is not expected in 2021”, the German Finance Ministry stresses in a press release.
According to Berlin, the economic, social and health impact of the coronavirus pandemic will require additional expenditure of around €47 billion in 2021. At the same time, tax revenue losses are estimated at €42.2 billion for next year. To compensate, the German Federal Government plans to take out €96.2 billion in new loans. However, these new loans, which will be contracted in 2021, will represent half the volume of those raised in 2020 to deal with the pandemic. And in 2022 they will be reduced to €10.5 billion.
“We act decisively, even if it costs a lot of money, because doing nothing would cost our country even more”, said German Finance Minister Olaf Scholz, as reported by Reuters.
The government also argues that the level of planned investments - €55 billion in 2021, 48 billion between 2022 and 2024 - will be higher than the pre-crisis level. Future areas of focus include artificial intelligence, 5G and 6G technologies and hydrogen.
On Tuesday, the Ifo Institute revised the extent of the recession for Germany in 2020 from 6.7% to 5.2% of GDP.
More info at: https://bit.ly/3iV7otW (Original version in French by Mathieu Bion)