• Merkel cabinet backs 2022 net borrowing of 100 billion euros

Market news

23 June 2021

Merkel cabinet backs 2022 net borrowing of 100 billion euros

Bloomberg reports that Chancellor Angela Merkel’s cabinet approved plans to increase borrowing by 99.7 billion euros next year to help finance Germany’s response to the coronavirus pandemic.

Under the plans approved Wednesday, a constitutional check on borrowing -- known as the debt brake -- will be suspended next year for a third year in a row. While Germany aims to reinstate the mechanism from 2023, pressure on the federal budget will likely continue.

Scholz’s budget and financing outlook through 2025 probably won’t survive in their current form. The government that takes over after September’s election will likely alter the plans before they go through parliament.

Merkel’s conservative bloc is set to retain power, recent polls suggest, possibly in a coalition with the Greens. The SPD is likely to go into opposition after ruling with the CDU/CSU for all but four years since 2005.

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