The largest European economy, Germany, will finally abandon the вЂњblack zeroвЂќ policy and will go into debt at a record. Reuters writes about the plans of the country's finance minister Olaf Scholz.
It is noted that in 2021 Berlin plans to borrow 100 billion euros and direct them to combat the consequences of the coronavirus pandemic. Thus, the previous intentions to issue government bonds for 80 billion euros during the year increased by a quarter.
The German economy is experiencing its worst recession since the 1970s: in the second quarter, it contracted by 10.1 percent compared to the period from January to March. The government has been forced to launch large-scale support programs, mainly aimed at subsidizing companies with a reciprocal obligation to maintain employment.
Implementation of the plan to increase government borrowing will mean abandoning the вЂњblack zeroвЂќ policy that has been practiced for most of the last decade. It implies the refusal to issue new public debt and the desire to maintain a budget surplus, in which expenses are financed by revenues, including taxes.
This approach has been repeatedly criticized, the frequency of which has increased markedly with the onset of the coronavirus pandemic. According to many German and foreign economists and politicians, the desire to avoid new borrowing at any cost reduces the potential for the development of the national economy, which could be stimulated by additional budget spending.