Germany set to back £550bn rescue package
THE German government is reportedly to approve a €600billion (£550billion) rescue package to support its economy during the coronavirus crisis, including buying stakes in businesses.
Details have not yet been made public but measures under discussion include €400billion of government guarantees for existing debts and €100billion in state loans, according to details leaked to the German press.
The move would see the government finally abandon its strict balanced budget policy.
Angela Merkel’s government is setting aside €100billion to buy stakes in ailing strategic businesses to prevent them failing, according a draft of the proposals seen by Handelsblatt newspaper.
The measures come in addition to an emergency budget in which Olaf Scholz, the finance minister, is to announce an extra €150billion in government spending to tide Germany through the crisis.
The measures Mr Scholz is set to announce reportedly include a €50billion emergency fund to help small businesses and the self-employed, as well as new spending on hospitals.
Mr Scholz is also expected to cut taxes and announce a boost in family benefits to help those who have lost earnings because they have to take care of children after schools and nurseries were ordered to close.
Germany is reportedly planning to borrow €356billion – equivalent to 10 per cent of its GDP – to finance the measures.
Mr Scholz has refused to countenance new government borrowing since taking over as finance minister in 2018, instead remaining wedded to the German mantra of a balanced budget, or the “black zero” as it is known here.
But he has already made clear he is ready to abandon that policy in order to tackle the coronavirus crisis.
“We will have to temporarily exceed the debt ceiling,” Mr Scholz said. “This shows how capable our state is of action.”
“The debt ceiling provides opportunities for such serious events,” Peter Altmaier, the economy minister, said this week.
Mrs Merkel’s cabinet is expected to approve the latest emergency measures tomorrow. The spending package comes amid reports that her government is planning changes to the law to take over powers from regional authorities.
At the moment Germany’s 16 state governments have control over emergency measures, while Mrs Merkel’s government can only provide recommendations.
Under the planned changes, the federal government would be given control over medical supplies and the power to recruit medical staff by force.
It would also be given the authority to use mobile phone data to locate those who have been in contact with the infected. But the measures stop short of giving the federal government the final say over lockdowns or curfews, which would remain under the authority of state governments.