BERLIN (Reuters) – Germany is facing growing calls at home and from abroad to ditch its self-imposed balanced budget rule and take on new debt to inject more fiscal stimulus into Europe’s largest economy.
A senior government official told Reuters this month that the finance ministry is toying with the idea of issuing new debt in the form of “green bonds” which could help finance a costly climate protection package.
As the economy teeters on the brink of recession and borrowing costs hit record lows, Finance Minister Olaf Scholz has also said that Germany’s reduced debt level gives Berlin the fiscal muscle to counter a possible crisis “with full force”, suggesting room for extra spending of up to 50 billion euros (£46 billion).
Below is an overview of events that could soon decide about the fate of Germany’s balanced budget rule, also known as the Schwarze Null or black zero.
+++ SEPT 2 +++
Leaders of Chancellor Angela Merkel’s conservatives and the co-ruling, centre-left Social Democrats (SPD) meet behind closed doors to prepare a comprehensive package of climate protection measures that are likely to burden the federal budget massively.
+++ SEPT 10-13 +++
Lawmakers in the Bundestag lower house of parliament debate the government’s draft federal budget for 2020 and the mid-term financial planning until 2023. Scholz’s opening speech will give more hints about his commitment to the balanced budget rule.
+++ SEPT 13 +++
Merkel’s conservatives and the SPD continue negotiations to fine-tune climate protection measures. The package is likely to include a pricing mechanism for carbon emissions and payouts for low-income families to cushion the effects of the new measures.
+++ SEPT 20 +++
The so-called climate cabinet, including Merkel, Scholz, Environment Minister Svenja Schulze and Economy Minister Peter Altmaier, will seal the climate protection package and decide if the new measures can be financed without new debt.
+++ MID-OCT +++
Should the climate cabinet decide against burying the ‘black zero’ budget, Germany’s deteriorating growth outlook could still put the final nail in its coffin in autumn.
The government is expected to update its growth forecasts in mid-October. In April, it slashed its 2019 estimate to 0.5% after an expansion of 1.5% in 2018. For 2020, Berlin predicted a consumption-driven rebound with economic growth of 1.5 percent.
+++ OCT 30 +++
The finance ministry’s panel of tax experts publishes its latest estimates for tax revenues. Weaker growth means weaker tax revenues which would limit the government’s room for extra spending and a possible fiscal stimulus package.
+++ NOV 14 +++
The Federal Statistics Office releases gross domestic product figures for the third quarter. This shows if the German economy has managed to avoid a recession over the summer.
Germany’s export-reliant economy shrank by 0.1% on the quarter from April to June, and another quarter of contraction would be viewed as a technical recession.
A weak read-out would raise the pressure on the government to counter the crisis with a debt-financed stimulus package.
On the same day, budget lawmakers in the Bundestag lower house of parliament put the final touches to the 2020 budget and the mid-term financial planning until 2023, a marathon meeting that often drags on until late into the night.
+++ NOV 26-29 +++
Lawmakers in the Bundestag lower house of parliament discuss and vote on the 2020 budget. They have the final say on the decision whether Germany should take on new debt.
+++ DEC 6-8 +++
SPD members will vote a new party leadership at a congress in Berlin. The question of ditching or sticking to the black zero budget, an invention by Merkel’s conservatives, is likely to play an important role in the race.
Scholz is running on a dual ticket to become co-leader of Germany’s oldest party, and victory would bring him one step closer to his dream of becoming Germany’s next chancellor.
(Reporting by Michael Nienaber, editing by Ed Osmond)