Merkel Commits to Fiscal Discipline Once Pandemic Ends

Chancellor Angela Merkel on Thursday said Germany must return to its fiscal discipline when the coronavirus pandemic is over, underlining her commitment to a constitutionally-enshrined no-new debt rule.

Merkel's government dropped its balanced budget axiom for three years to help its economy weather the blow of the pandemic.

But the chancellor said in a speech to the federation of family-run businesses that the move to suspend the so-called "debt brake" cannot be permanent.

"As important as significant state aid is in this exceptional situation, there are many good reasons for the debt brake to continue to have its place" in the constitution, she said.

The pandemic had in fact shown the value of the no-new debt rule, she said, as the rule required the country to put aside sufficient funds in good times to "create room for maneuver" when crises strike.

The "debt brake" forbids the government from borrowing more than 0.35 percent of gross domestic product (GDP) in a year.

After maintaining a budget surplus for the last decade, the economic slump caused by the pandemic has forced Berlin to take on 370 billion euros ($444 billion) in new debt in 2020 and 2021, with an extra 85.1 billion planned for 2022. 

Having originally planned to halt borrowing in 2022, the government is now aiming to return to its golden rule of fiscal discipline a year later, with only 8.3 billion euros of new debt in 2023.