German Finance Minister Christian Lindner on December 16 announced plans to reform the country's public debt rules to boost public spending during the economic downturn, while criticizing planned price hikes for farmers and airlines.
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| German Finance Minister Linder. (Source: AFP) |
According to Politico , Minister Lindner said he plans to revise an economic calculation component to quantify the amount of new borrowing the government is allowed to borrow each year under Germany's "debt brake" rules.
Mr Lindner said the reforms would be implemented next year, giving the government more flexibility in spending in 2024, a year when the economy has been forecast by the German Economic Institute to continue its recession.
However, Mr Lindner (FDP), stressed that he did not support further changes to the “debt brake” rules, for example a proposal to exempt climate protection investments from spending restrictions. The FDP’s coalition partners, the Social Democrats of Chancellor Olaf Scholz and the Greens of Economy Minister Robert Habeck, have called for stronger debt regulation reforms.
The "debt brake" rule, enshrined in the German Constitution, which keeps the federal deficit at 0.35% of GDP, except in emergencies, has become a major political issue in Germany's month-long budget crisis.
Under the budget deal, the government agreed to maintain the “debt brake” in 2024, after suspending it only this year and previous years due to the conflict in Ukraine, the energy crisis and the COVID pandemic. However, the ruling coalition has stressed that the “debt brake” could be suspended again in 2024 if Germany needs to provide more support to Ukraine, for example if the conflict worsens or if other backers such as the United States reduce their aid.
There is also continued debate within the coalition over spending cuts as part of the budget deal, suggesting the deal remains fragile. Mr Lindner said some cuts affecting diesel subsidies used in agriculture, as well as a planned tax on domestic jet fuel, needed to be renegotiated because he did not want to burden businesses further.
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