German Chancellor Olaf Scholz’s government approved a supplementary 2023 budget that includes the suspension of rules limiting net new borrowing for a fourth consecutive year.
Scholz’s coalition was forced into lifting the so-called debt brake again after a ruling this month by the nation’s top court meant that tens of billions of euros of debt in special funds would have to be accounted for in the regular federal budget.
While it doesn’t mean that Germany is adding to its debt burden, it lifts the figure for net borrowing for this year by €25 billion ($27.4 billion) to €70.6 billion, according to the Finance Ministry. In the original 2023 plan approved at the end of last year, it was €45.6 billion.
“We are not taking on any additional debt this year,” Finance Minister Christian Lindner said Monday in an emailed statement.
Lindner initially insisted on restoring the borrowing mechanism this year after it was suspended to help the government deal with the fallout from the Covid-19 pandemic and the energy crisis.
The government will have to account for more off-budget new borrowing in next year’s finance plan. It has penciled in about €22 billion in new federal debt for 2024 but that figure is now likely to have to rise to around €40 billion.
Lindner, the chairman of the Free Democrats, is coming under increasing pressure from his coalition partners — Scholz’s Social Democrats and the Greens — to back another suspension of the debt brake next year.
There have also been calls across the political divide for the borrowing rules to be overhauled to enable Germany to make the massive investments needed for its transition to a less polluting and more technologically advanced economy.
Such a move would require a two—thirds majority in parliament and therefore the support of the main opposition conservatives, who filed the lawsuit challenging the use of the special funds.
Lindner’s revised 2023 budget will now be sent to parliament for approval, with an initial debate scheduled for Friday morning. Scholz is due to address Bundestag lawmakers about the implications of the court ruling on Tuesday at 10 a.m. in Berlin.
