BERLIN (Reuters) – German Finance Minister Christian Lindner has asked fellow Cabinet members to help fund any additional spending on budget cuts in other departments, two people familiar with the draft budget told Reuters on Tuesday. government for 2022.
The guidelines mark a shift in fiscal policy in Berlin after two record years in net new borrowing and unprecedented state spending to cushion the impact of the Covid-19 pandemic on citizens and businesses in Europe’s largest economy.
The discussions were previously reported by the German daily Handelsblatt.
Lindner is the leader of the fiscally conservative Liberal Democratic Party (FDP), the smallest partner in Social Democrat Chancellor Olaf Scholz’s ruling three-party coalition, which also includes the Greens, environmentalists and pro-spenders.
“Additional spending should be financed by appropriate countermeasures – for example, reallocating funds within the respective department or increasing revenue with measures such as reducing subsidies,” said one source.
Germany took on record new debt of €215 billion last year, following an unprecedented €130 billion loan in 2020 to finance measures during the coronavirus pandemic.
Both Scholz and Lindner argue that Germany should return to a more conservative fiscal policy and reduce its debt stockpile once the coronavirus pandemic is over, as the country must prepare in a timely manner for when the next crisis strikes.
In their coalition agreement, the three parties also agreed to probe new forms of public spending, such as allowing the Federal Real Estate Agency to fund a push for more social housing with additional new debt that would not be accounted for under the Constitution’s debt rules.
(By Michael Nienaber)
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