Germany recently announced that it is working on a 2021 supplementary budget to invest more than $56 billion into its climate fund and it will be spent over the coming years to speed up the shift to a greener economy, according to media reports.
The three parties set to form a new government came together to finance the climate fund debt injection with still unused debt authorization in this year’s federal budget. The debt injection means the government will now make sure to fully use the entire debt limit originally granted by the parliament for 2021, according to sources.
This budget manoeuvre will also allow the leading coalition to make most of the suspension of Germany’s debt brake because of the Covid-19 pandemic this year and in 2022, it will be used to expand the climate fund. The winning coalition also wants to deploy the funds to make critical public investments in climate protection measures, ranging from charging points for electric vehicles, better-insulated homes and the digitisation of Europe’s biggest economy.
Olaf Scholz, chancellor-in-waiting suspended the constitutionally-provided debt limits of 2020 and 2021 to allow major spending to protect workers and companies from the impact of Covid-19. The government also took on a new record debt of £130 billion Euros last year and this year will borrow an additional £240 billion. By 2022, the government has estimated new debt of £100 billion.
Incoming finance minister Christian Lindner, in a newspaper interview earlier this month said that the debt plans for 2022 are quite sufficient. But this was before the Covid-19 outbreak escalated unexpectedly over the past few weeks, with some hospitals in specific regions being especially hard hit, almost reaching full capacity.
Scholz expects to be sworn in as Angela Merkel’s successor in the upcoming month after his centre-left social democrats, the Greens and the libertarian Free Democrats sealed a coalition agreement. The deal also agreed to create increased fiscal firepower to fulfil election promises by stretching the repayment period of the Covid-19 pandemic debt.