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Europe's Largest Economy, Germany, Will Run Into Record Debt, To Nearly 100 Billion Euros

Europe's Largest Economy, Germany, Will Run Into Record Debt, To Nearly 100 Billion Euros

The non-German economy, which is the top among European countries, will finally abandon the "black zero" policy and get into unprecedented debts. According to Reuters, such a decision is in the plans of German Finance Minister Olaf Scholz.

In the next 2021, the article notes, Berlin intends to borrow 100 billion euros. This money is planned to be used to fight the consequences of the coronavirus pandemic.

That means that the previous plans of the country's authorities to issue government bonds worth 80 billion euros over the course of the year will be increased by a quarter.

The German economy is experiencing its worst recession since the 1970s. In the second quarter, the GDP decreased by 10.1% compared to the first quarter of this year.

Against this background, the authorities are forced to launch large-scale support programs, which are mainly aimed at paying subsidies to businesses with a reciprocal obligation to maintain employment in the country.

According to the publication, the implementation of this plan of the Ministry of Finance to increase public borrowing will mean abandoning the policy of "black zero," which was put into practice and actively used for most of the last decade. "Black zero" means refusing to issue new public debt and striving to maintain a surplus budget, when expenditures are financed by income, including tax payments.

Earlier, this approach to the economy was repeatedly criticized by the authorities, and the pandemic only made it worse. Foreign economists and politicians have said that the desire to avoid new borrowing at any cost reduces the potential for the development of the German economy. On the contrary, additional budget expenditures can serve as an incentive.

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