Germany to incur 160 billion euros in new debt in 2021: Report

German Finance Minister Olaf Scholz is planning to incur at least 160 billion euros in new debt in 2021 to mitigate the economic impact of the COVID-19 pandemic, reported Reuters quoting three official sources.

The 160 billion estimate is 64 billion higher than the 96 billion euros that Scholz had initially planned to borrow for 2021.

The Angela Merkel coalition dominated Parliament had suspended the country’s debt brake providing a free hand to the government to take on net new debt of up to 218 billion euros to finance rescue and stimulus packages earlier in the year.

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The government is unlikely to need the entire amount it intends to demand, reported Reuters citing a government coalition source. The Finance Minister has already stated that he will request lawmakers to halt debt limits in the upcoming year.

Earlier in June, the German government had substantially increased its government debt as it decided to spend more in order to wriggle out of the coronavirus crisis.

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The Angela Merkel-led government had responded with one of the world’s largest fiscal packages to mitigate the effect of the coronavirus pandemic, providing a whooping 1.3 trillion euros in emergency spending and a 130 billion stimulus package. The rationale behind the government spending was to kick start consumer demand amid the coronavirus pandemic.