Germany to increase net debt by around 40 billion euros in 2022 – sources By Reuters

© Reuters. FILE PHOTO: Banknotes of different currencies including the euro, US dollar, Turkish lira or Brazilian reais are pictured in Frankfurt, Germany in this illustration photo taken May 7, 2017. REUTERS / Kai Pfaffenbach / Illustration

BERLIN (Reuters) – Germany plans to increase its new debt by 39.2 billion euros ($42.04 billion) this year to protect Europe’s biggest economy from fallout from the Russian invasion of Ukraine, government sources said on Monday.

The planned new loan will bring Germany’s net debt in 2022 to 138.9 billion euros.

Chancellor Olaf Scholz’s government is due to approve the debt-financed supplementary budget on Wednesday.

Germany has temporarily suspended constitutional limits on new debt to finance unprecedented fiscal support for the economy during the coronavirus pandemic, borrowing 130 billion euros in 2020 and a record 215 billion euros the year last.

Skyrocketing energy costs exacerbated by the Ukraine crisis have left Finance Minister Christian Lindner no choice but to prolong the debt-financed spending spree.

In addition to the amending budget, Germany provides 100 billion euros of credit authorizations for a special fund for the military.

The new debt will be used to finance tax breaks for households and public transport commuters, as well as fossil fuel subsidies for motorists totaling 14 to 16 billion euros, the sources said. Some €5 billion will be used to help businesses struggling with high energy prices.

($1 = 0.9324 euros)

Ann J. Cox