Despite the strict budget policy, Germany is planning to borrow additional funds in order to help citizens and businesses deal with pandemic consequences. Importantly, the government will abandon its long-term budget policy so that it can maintain financial aid programs.
"Next year we will continue to be forced to suspend the debt rules and spend considerable funds to protect the health of citizens and stabilize the economy," German Finance Minister Olaf Scholz said. He also added that the country would abandon its balanced federal budget approach, known in Germany as the "Schwarze Null," or black zero. Germany intends to borrow €100 billion to mitigate the impact of the coronavirus pandemic on the economy. Currently, Europe's largest economy is facing a recession. Only in the second quarter, it shrank by 10.1% compared to the previous one. However, the government sees no reason to give up stimulus measures. Besides, the lion's share of the allocated funds is spent on payments to businesses under an obligation to maintain employment. In other words, the authorities are trying to keep the employment level and wages stable across the country.
The current program to increase public borrowing is a de facto rejection of the black zero policy, which prohibits the issuance of new bonds to maintain a surplus budget (when expenditures are covered by revenue, including taxes).
