The debt brake falls

For a long time, the black zero was the primary goal of financial policy. But everything is different in times of crisis. The federal government is now preparing to include high schools if necessary.

A picture from good days: Chancellor Angela Merkel and her finance minister Olaf Scholz are no longer so close to each other in times of the pandemic.

Dhe federal government wants to pull the emergency regulation in the debt brake anchored in the Basic Law. The aim is to enable the federal government to borrow significantly more in the Corona crisis than previously allowed. As reported by the dpa news agency, the cabinet should adopt a corresponding regulation on Monday, and the Bundestag should approve it in the course of the week.

The debt brake has been part of the Basic Law since 2009. It stipulates that income and expenses are to be balanced without any new loans. The regulation only allows the federal government to easily go into debt, with up to 0.35 percent of the gross domestic product. According to Article 115, however, this upper limit can be exceeded in emergencies – for example in the event of natural disasters or exceptional emergency situations which “are outside the control of the state and have a significant negative impact on the state’s financial position”.

The emergency regulation must be approved by the majority of the Bundestag. In this case, the federal government must also draw up a repayment plan for the debt. Countries like Bavaria and North Rhine-Westphalia had already announced that they would take on more debt during the crisis.

The government apparently wants to partially nationalize companies if necessary

Federal Finance Minister Olaf Scholz wants to support large corporations in the Corona crisis with a temporary state participation if necessary. Liquidity could be guaranteed, said the SPD politician on ZDF. “I suggested that we supplement this with programs where we can then help with equity capital, i.e. temporarily invest in such companies if they find it useful and helpful.”

Economy Minister Peter Altmaier (CDU) said that he wanted to prevent a “sell-out” of German economic and industrial interests in the Corona crisis. “There must be no taboos. Temporary and time-limited state aid, including investments and takeovers, must be possible. “

Apparently, therefore, a fund is currently being discussed in the federal government, which is supposed to save companies from bankruptcy – also with capital grants. This could have a volume of around 500 billion euros. However, there have not yet been any resolutions, various points are still open, it was said in government circles. The federal government had already decided to significantly expand KfW loan programs in order to ensure the liquidity of companies during the corona crisis. These programs are aimed primarily at small and medium-sized companies.

Der Spiegel reported that the fund should save companies from bankruptcy by issuing guarantees for their liabilities and actually injecting capital, which would amount to partial nationalization. The model for the new instrument is the special fund for financial market stabilization (Soffin), with which the state rescued banks from distress during the financial crisis twelve years ago.

Supplementary budget planned

A person familiar with the considerations told Reuters news agency on Friday that this was one of the options, but that there was still no consensus in the government. The fund would primarily operate with guarantees for companies, but would also enable state investments in companies – intended for a transitional period. The cabinet is expected to take specific decisions next Monday. Until then, the details of the rescue measures and their implementation are still about, said the insider.

According to dpa information, a supplementary budget is planned for 2020 because of the new issues. The amount has not yet been finally decided, a volume between 60 and 100 billion euros is under discussion. The money is needed to alleviate the consequences of the corona pandemic. The federal government is also planning a hardship fund, from which the operating costs for small businesses and self-employed persons will be taken over for three months.

According to government circles, this solidarity fund is about a volume of 40 to 50 billion euros – primarily direct aid for operating resources, rents and leasing obligations. The so-called crisis cabinet agreed on Thursday evening that this instrument had to come, said the insider. At the weekend, all the details would have to be coordinated.