Germany to pass extra budget for more climate funds on Monday – sources

By Michael Nienaber

BERLIN (Reuters) -Germany’s new coalition government will pass a supplementary budget on Monday to enable more public investments in the shift towards a greener and more digitalized economy, sources told Reuters on Thursday.

The coalition parties agreed to channel more than 60 billion euros ($67.73 billion) of unused debt in this year’s federal budget into a climate and transformation fund, three people familiar with the matter told Reuters on condition of anonymity.

The debt-financed injection means that Berlin will now make nearly full use of the 240 billion euro debt ceiling originally granted by its parliament for 2021, the sources added.

A finance ministry spokesman declined to comment.

Depending on how much additional debt was needed to finance pandemic emergency measures in November and December, the new government could end up parking up to 80 billion euros in the climate fund for future investments, one of the sources said.

The government has taken up less debt than projected so far this year as tax revenues developed better than expected and fewer companies asked for pandemic emergency aid over the summer. From January to October, the federal government borrowed less than 150 billion euros on the markets.

The budget manoeuvre, as agreed by the centre-left Social Democrats, the pro-spending Greens and the libertarian Free Democrats (FDP) in their coalition deal, allows the parties to make the most of the suspension of Germany’s debt brake prompted by the pandemic this year and next by beefing up the climate fund.

The coalition wants to deploy the funds to make critical public investments in climate protection measures – from charging points for electric vehicles to better insulating homes – and the digitalization of Europe’s largest economy.

The new government agreed to use an emergency clause in the constitution for a third year in a row in 2022 to suspend strict debt limits and enable new borrowing of up to 100 billion euros. This will come on top of unprecedented net new debt of 130 billion euros in 2020 and nearly 240 billion euros in 2021.

From 2023 onwards, the new ruling coalition wants to return to the “debt brake” rule of the constitution that limits new borrowing to a tiny fraction of economic output.

($1 = 0.8859 euros)

(Reporting by Michael Nienaber, Editing by Victoria Waldersee and Alex Richardson)

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