Germany May Bust Budget Rule Again, This Time For Climate: Minister

Germany may have to breach its balanced budget policy for a fourth year in a row in order to fund more ambitious climate protection policies which were recently agreed, its economy minister said Monday

Berlin, (APP - UrduPoint / Pakistan Point News - 17th May, 2021 ) :Germany may have to breach its balanced budget policy for a fourth year in a row in order to fund more ambitious climate protection policies which were recently agreed, its economy minister said Monday.

Chancellor Angela Merkel's government had been eyeing a return to its golden rule of fiscal discipline in 2023, after signing off record borrowings in 2020-2022 to fight the economic blow of the pandemic.

But the plan for 2023 "is now outdated," Economy Minister Peter Altmaier told the Rheinische Post daily.

"The expansion of renewable energies must now go faster than previously planned because of the stricter climate protection law," he said.

The German government last week agreed on more ambitious targets to reduce CO2 emissions, after the country's top court declared a flagship climate law "insufficient".

Under the new plan, Berlin expects to slash emissions by 65 percent by 2030 compared to 1990 levels, going further than the current 55 percent reduction target.

The cut will reach 88 percent by 2040, with the goal of bringing Germany to carbon neutrality by 2045, five years earlier than previously expected.

Altmaier said this means that the state will have to dig deeper to fund the expansion of renewable energy production, so that consumers are not left with rising electricity bills.

Nevertheless, the minister said it would be "doable" to pass "a solid Federal budget in 2023 or 2024 that does not call for an exception to the balanced budget rules".

After maintaining a budget surplus for the last decade, the economic slump caused by the pandemic has forced Berlin to suspend its constitutionally enshrined no-new-debt rule forbidding the government from borrowing more than 0.35 percent of gross domestic product (GDP) in a year.

Total new debt taken on for 2020 and 2021 reached 370 billion Euros, with an extra 85.1 billion planned for 2022.

However, with a general election coming in September, environmental issues have soared to the top of the political agenda as the Green party is now leading opinion polls ahead of Merkel's conservatives.