Germany to abandon debt limits with 156bn euros of new borrowing

German ministers agreed Monday to blast through a constitutional limit on government deficits with 156 billion euros of new borrowing to fight the impact of the novel coronavirus, Finance Minister Olaf Scholz said.

“We’re showing that right from the beginning we will fight with all our might against this crisis calling into question healthcare for our citizens or economic activity in this country,” Scholz said at a Berlin press conference.

Speaking alongside Scholz, Economy Minister Peter Altmaier warned the crisis could slash German GDP this year by “at least as much” as during the 2008-9 financial crisis, when it plunged five percent.

The 156 billion euros ($168 billion) Berlin will raise from new debt covers more than 122 billion in new spending and an expected tax shortfall of over 33 billion compared with projections made before the coronavirus crisis struck.

MPs in the Bundestag (lower house of parliament) are expected to wave through the package on Wednesday, while it should pass the second house representing Germany’s federal states on Friday.

On top of the 122 billion euros in direct spending, including 50 billion to support small businesses and 55 billion for fighting the pandemic, Germany will also set up a protective shield for workers and companies.

The measures will mean the government will offer a total of around 822 billion euros of guarantees through public investment bank KfW for loans to companies, as well as extending social programmes like top-up pay for workers placed on shorter hours.