Germany's Finance Minister wants to lift debt cap
February 26, 2020
Financially-stricken towns in Germany are to have their debts taken on by the federal government, if Finance Minister Olaf Scholz gets his way.
But it might not be that easy, since the move would break a taboo in Germany's debt-averse conservative government that has been enshrined in the constitution since 2009, when a "debt brake" was written into the Basic Law in the aftermath of the European financial crisis.
Die Zeit newspaper reported on Wednesday that Scholz, who is also Vice Chancellor to Angela Merkel, is planning to present a plan in March that would temporarily allow some 2,500 municipalities to pass on their debts to the federal government.
The scheme is meant to free up resources to allow local governments to invest more in roads, schools, and hospitals, the report said. While many small towns struggle to pay for insfrastructure, the federal government has some capacity to spare: In January, Germany posted a record-breaking budget surplus.
The Finance Ministry would not comment on the press report, though it was also independently reported by Der Spiegel. Both outlets cited unnamed ministry sources.
The black zero
The debt brake meant that as of 2016, Germany's federal and state governments were not allowed to run a budget deficit of more than 0.35% of GDP, though exceptions can be made in the event of natural disaster or economic crisis.
The brake has manifested itself recently through the so-called "black zero," the colloquial name for the German Finance Ministry's insistence on maintaining a balanced budget without taking on new debt.
Scholz has been committed to maintaining the policy, at least until now, despite being a member of the center-left Social Democrats, some of whose members are skeptical of the black zero.
But the move promises a political headache: Scholz may have trouble getting the plan through parliament without putting another crack in the government coalition.
Support from government ranks is not at all secure, and members of Angela Merkel's center-right Christian Democratic Union (CDU) have already voiced criticism.
"You can't just suspend the debt brake at your convenience, just as you can't suspend basic rights," CDU Bundestag member Eckhardt Rehberg told the Frankfurter Allgemeine Zeitung on Wednesday. "Scholz has no majority for breaking the dam. He should bury this project quickly."
Not only that, altering the constitution requires a two-thirds majority in both chambers of parliament, the Bundestag and the Bundesrat, which would mean that, even with CDU support he would need opposition votes to pass the bill.
bk/aw (AFP, dpa)