Germany must build up budget reserves for the next crisis

© Reuters. Outgoing Finance Minister and new German Chancellor Olaf Scholz delivers a speech during the handover ceremony with his successor at the German Federal Ministry of Finance in Berlin, Germany, December 9, 2021. Tobias Schwarz / Pool via REU

By Christian Kraemer and Michael Nienaber

BERLIN (Reuters) – Tackling the coronavirus pandemic is the new German government’s biggest challenge and Berlin must now create budget reserves to prepare for the next crisis, Chancellor Olaf Scholz of the center Social Democrats said on Thursday -left.

Scholz’s ruling three-way coalition with the more budget-conscious spendthrift Greens and Free Democrats (FDP) agreed on a supplementary budget to inject more than 50 billion euros ($ 56.57 billion) in unused debt in a special fund to enable climate protection investments, sources told Reuters last month.

The cabinet of the new “traffic lights” coalition, named after the respective colors of the three parties, is expected to adopt and present the supplementary budget next Wednesday.

Speaking at a handover ceremony of his former finance ministry to FDP leader Christian Lindner, Scholz said the finance minister’s role was “very special” as he still has to deal with all aspects of politics of the government.

Thanking Scholz for his confident cooperation in coalition negotiations, Lindner pledged to abide by the tax rules of the constitution, use taxpayers’ money sparingly and fight for strong public finances.


Senior finance ministry officials have already prepared the supplementary budget as agreed by the coalition parties, Lindner said, adding that Secretary of State for Finance Werner Gatzer had informed him about the fiscal possibilities of the federal budget.

In a sign of continuity following Scholz’s close cooperation as finance minister with France, Lindner announced that he would call his French counterpart Bruno Le Maire later Thursday to discuss upcoming decisions in the eurozone and find common ground.

Lindner will travel to Paris on Monday to meet Le Maire in person and deepen the dialogue between the two largest economies in the euro area.

In their coalition agreement, the three coalition parties signaled their openness to reforming the European Union’s fiscal rules, also known as the Stability and Growth Pact, to allow more investment in the transition. towards a green economy.

The new government has agreed to use an emergency clause in the constitution for the third year in a row to suspend strict debt limits in 2022 and allow new borrowing of up to € 100 billion. This will be in addition to unprecedented new net debt of € 130 billion in 2020 and nearly € 240 billion in 2021.

From 2023, the new ruling coalition wants to return to the constitutional “debt brake” rule which limits new borrowing to a tiny fraction of economic output. ($ 1 = € 0.8839)

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