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German budget lawmakers expect Scholz to stick to balanced budget goal

German budget lawmakers expect Scholz to stick to balanced budget goal
German Finance Minister Olaf Scholz of Germany's Social Democratic Party (SPD) attends an election campaign event ahead of the upcoming Brandenburg state election in Oranienburg, Germany, August 30, 2019. REUTERS/Annegret Hilse -
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ANNEGRET HILSE(Reuters)
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BERLIN (Reuters) – German Finance Minister Olaf Scholz has told lawmakers that the government is “at the moment” not planning to ditch its balanced budget goal and fund a costly climate protection package with new debt, a senior budget lawmaker said on Tuesday.

Chancellor Angela Merkel’s conservatives and their co-ruling centre-left Social Democrats (SPD) are currently negotiating a comprehensive package of climate protection measures that are likely to burden the federal budget massively.

A senior government official told Reuters last month that the Finance Ministry is toying with the idea of issuing new debt in the form of “green bonds” which could help finance expensive new measures meant to cut Germany’s carbon dioxide emission.

During a closed-door meeting of Scholz with budget lawmakers from the ruling parties on Tuesday, there was agreement that additional climate spending would be financed with existing funds and additional revenues, the SPD’s chief budget lawmaker Johannes Kahrs told Reuters.

The issuance of new debt and with it the end of Berlin’s disputed balanced budget policy, also known in Germany as the black zero, is not planned “at the moment”, Kahrs added.

The budget lawmakers voiced their expectation that the federal government would manage to increase spending without new debt until 2021 when the current legislature ends, Kahrs said, adding that Scholz did not object to that notion.

The climate 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.

Germany’s so-called climate cabinet is expected seal the package and decide if the new measures can be financed without new debt on Sept. 20.

The leader of Merkel’s Christian Democrats (CDU) said last week that the conservatives regard the balanced budget policy as indispensable.

(Reporting by Holger Hansen; Writing by Michael Nienaber; Editing by Mark Heinrich)

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