Tuesday 17 September 2019

Germany eyes looser budget to counter slump risk

German Chancellor Angela Merkel
German Chancellor Angela Merkel

Birgit Jennen

Germany's plans to run balanced budgets through 2023 could be reviewed if economic conditions change, according to the finance ministry. The euro rose on the news.

"Should there be a need for adjustment because of overall economic developments or external factors, it will be decided in the context of the budget planning and taking the coalition agreement into account," Bettina Hagedorn, a deputy finance minister, wrote to a lawmaker in a letter seen by Bloomberg News.

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German bonds extended declines on the news, which some investors interpreted as increasing the chances of a government stimulus package to revive growth.

The finance ministry confirmed the authenticity of the letter but declined to comment further.

With a potential recession looming, business leaders and an increasing number of mostly centre-left politicians have urged Chancellor Angela Merkel to boost investment and increase debt. Germany's lower house of parliament today begins debating the 2020 budget, with Finance Minister Olaf Scholz due to speak in Berlin this morning.

Scholz has so far resisted calls for Germany to take advantage of historically low borrowing costs, though pressure will increase if Europe's biggest economy slips into recession in this quarter.

Separately, Reuters reported Germany is considering a "shadow budget" to boost investment beyond restrictions imposed by its own debt rules.

Bloomberg

Irish Independent

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