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secondUnfinance Minister Olaf Scholz (SPD) found himself on the defensive at the beginning of the budget week in the Bundestag. In some cases, opposition politicians harshly criticized the grand coalition’s debt policy. The focus has already gone beyond the federal elections in September 2021. Attention turned to the question: How quickly can record debts be reduced again? Do they need to do it?
Scholz defended the planned new debt of almost 180 billion euros for next year. It is only thanks to the massive use of financial resources that Germany has overcome the pandemic better economically and socially than many had initially expected.
Despite the high spending on crisis management, he is not concerned about the future of the country beyond 2021. “We will come out of the crisis,” said the SPD chancellor candidate. He presented a supposedly simple recipe: Germany can and must be confident that the economy will recover quickly after the pandemic.
“We did it once before, after the financial crisis,” Scholz said. He even tried to give the impression that this time it was easier. About ten years ago, debt was more than 80 percent of economic output, so Scholz is now only increasing to just over 70 percent.
The 180 billion euros that the Bundestag will approve this week for 2021 are added to the around 160 billion euros that the federal government will probably have to incur in new debt this year; The Bundestag even approved a net debt of up to 218 billion euros.
The FDP does not want to be as relaxed about it as the Federal Minister of Finance. “Debt is sweet poison,” said deputy chairman of the parliamentary group Christian Dürr. Therefore, the current burden would be passed on to future generations, which is unacceptable.
Concern about high public debt
Polls showed that two-thirds of people were already very concerned about public debt. The AfD demanded significantly lower debts. The federal government’s reaction to the crisis with the partial shutdown was completely overblown, said housekeeper Peter Boehringer. “After us the flood” is the motto of this house.
Eckhardt Rehberg (CDU), budget spokesman for the CDU / CSU parliamentary group, defended the high level of new debt during the parliamentary debate, referring to the severity of the crisis. “In addition to dealing with the consequences of World War II, this is the greatest challenge in the history of the Federal Republic,” he said. But he also recalled that the new debts will have to be canceled again from 2026. “We should not give the impression that we can afford anything.”
The debt brake rules anchored in the Basic Law establish that in “exceptional emergency situations”, although more debts may be incurred, these must also be repaid in subsequent years.
The repayment plan for new debts in 2021 runs from 2026 to 2042 inclusive. According to the previous calculation, the federal government, together with this year’s debts, has to write off around 15,000 million euros annually.
NRW extends reimbursement to 50 years
So this money is missing for other expenses. A look at the federal budget for 2021 shows that this is definitely a challenge, as it stipulates that the Family Ministry and the Environment Ministry together will not even be able to spend € 15 billion next year.
Therefore, the Left and the Greens want to say goodbye to the debt brake in its former form after the federal elections. “This future murderer should finally be abolished,” said Gesine Lötzsch of the Left Party. Sven-Christian Kindler is bothered by the short repayment periods when paying off debt in crown.
The state of North Rhine-Westphalia, led by the CDU, extends the reimbursement for 50 years. There is no reason for the federal government’s time pressure, so Kindler: “Right now, the state is making money on loans,” he said. Negative interest rates should be used, especially since Germany has a relatively low debt ratio internationally.
Kindler came out in favor of a fundamental reform of the debt brake. “After Corona you shouldn’t use the red pencil,” he said. If additional loans were contracted to invest in climate protection, digitization and infrastructure in the country, these would have to be allowed even without the determination of an emergency situation. The Greens want to implement additional investments of 50 billion euros per year by 2030.
“The debt brake is good and correct”
Finance Minister Olaf Scholz and the CDU / CSU have already announced that they want to return to the debt brake from 2022. “The debt brake is good and correct,” the Rehberg Union budget said. Critics of the debt brake were supported by the organization of industrialized nations OECD.
She advises the federal government not to return to strict budget discipline too soon after the Corona recession. “An immediate reintroduction of a strict deficit limit under the debt brake could jeopardize the recovery.”
In the event of a weak economic recovery, even additional support measures should be taken. Fiscal impulses are only likely to be phased out if the economic recovery has “really started.” It is not yet possible to say whether it will be ready by the end of 2021 when the next Bundestag adopts the budget for 2022.
One of the proponents of the debt brake is the Bonn Federal Audit Office, whose task it is to check the best possible use of tax revenue. In his recently published comments on the federal budget and economic management, he concludes: the federal government has already set aside so much money for future expenditures in pre-Crown budgets than additional debt in addition to crisis management, that is, for vaccines, FFP2. Masks and grants for businesses – not necessary.
These funds are held primarily in special, special purpose and trust assets. One of the best known examples is the fund for the rehabilitation of schools launched in 2015 and endowed with 3.5 billion euros. According to the Federal Court of Accounts, at the end of 2019 only 202 million euros or six percent of the money had been accessed.
