Germany will increase its net debt by some 40 billion euros in 2022 – sources

Germany plans to increase its new debt by 39.2 billion euros ($42.04 billion) this year to protect Europe’s largest economy from fallout from Russia’s 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 companies struggling with high energy prices.
Source: Reuters (report by Joseph Nasr and Holger Hansen edited by Paul Carrel and Catherine Evans)

Ann J. Cox