Supplementary budget passed: Corona crisis continues to drive up debts

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Status: March 24th, 2021 5:28 pm

The cabinet passed the supplementary budget for this year and the benchmarks for next year. Billions of euros are again planned for further corona aid. New debt could only decline from 2023.

From Thorsten Huhn,
ARD capital studio

Federal Finance Minister Olaf Scholz said that he acted quickly, forcefully and decisively during the crisis, referring at the beginning of his press conference to the aid that many companies are getting from the state treasury.

Finance Minister Scholz is planning a supplementary budget for the current year

Daniel Pokraka, ARD Berlin, daily show 20:00, 24.3.2021

The state had spent billions in order to better cope with the Corona crisis. 400,000 companies could have been saved in this way, explained Scholz. He pointed out that Germany had done so well in recent years that it was now possible to help companies in distress.

“We expect new debt to have risen to 75 percent of economic output by the end of the year,” said Scholz. That is “still less than at the end of the last economic and financial crisis. At that time it was more than 80 percent of economic output”.

The exceptional situation of the pandemic shapes budget planning

Both the supplementary budget for the current year and for 2022 are characterized by the exceptional situation of the corona pandemic. The state will provide further funds to support citizens and businesses. “In particular, additional funds for corporate aid amounting to 25.5 billion euros – and thus a total of 65 billion euros”, said Scholz. In addition, there would be the cost of vaccine procurement in the amount of around 6.2 billion euros.

Although the financial situation of the Federal Republic has deteriorated significantly due to Corona, the Federal Minister of Finance is optimistic. Exceeding the credit limit is necessary and justified, emphasized the SPD minister:

We will do everything to get through the crisis well. That’s expensive, but doing nothing would be a lot more expensive. A good aid policy is also a good financial policy.

Billions in debt this year and next

Scholz assumes that the German economy will not reach its pre-crisis level until the middle of next year at the earliest: “That means that we will again have noticeable shortfalls in tax revenues”, while the federal government will have to “shoulder considerable additional burdens in the federal budget”. Therefore, the debt brake could not be adhered to in 2022 either.

The federal cabinet has approved the draft budget for 2022 presented by Scholz. It provides for additional debt of around 60 billion euros this year and a debt limit of 81 billion euros for next year. The new debt is 240 billion euros, mainly because of the shortfall in income due to the Corona crisis.

The Federal Finance Minister promises that new debt will decline significantly from 2023 onwards.

Scholz on the supplementary budget and finances

Torsten Huhn, ARD Berlin, March 24th, 2021 4:30 p.m.





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Supplementary budget passed Corona crisis continues drive debts

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