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New German finance minister wants ‘realistic’ debt brake reform, report says
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BERLIN (Reuters) -New German Finance Minister Joerg Kukies dampened expectations that a reform of the nation’s spending cap, known as the debt brake, could lead to more leeway in the federal budget in an interview with the Handelsblatt newspaper published on Friday.
BERLIN (Reuters) -New German Finance Minister Joerg Kukies dampened expectations that a reform of the nation’s spending cap, known as the debt brake, could lead to more leeway in the federal budget in an interview with the Handelsblatt newspaper published on Friday.
“You have to look at what is realistic and what there could be a political consensus on,” Kukies told Handelsblatt, adding that “in my view, this would be a moderate, targeted reform.”
German political parties have bristled over the spending rules, which limits the country’s public deficit to 0.35% of gross domestic product, viewing it as a hindrance at a time when the Ukraine war has held back growth in Europe’s largest economy.
A dispute over spending led to the collapse of Germany’s government earlier this month, after Chancellor Olaf Scholz fired Kukies’ predecessor, Christian Lindner, ending a coalition between Scholz’s SPD, Lindner’s pro-market FDP and the Greens.
Scholz said on Friday a “moderate reform” of the debt brake is needed, as additional expenditures for defence should not come at the cost of investments or welfare programs.
In 2028 a total of 80 billion euros will be needed to comply with the NATO target of spending 2% of GDP on defence — almost 30 billion more than in the 2025 draft budget which proposes defence spending of 53 billion euros.
“We won’t get rid of the debt brake. We don’t even want to get rid of it. But we want it to be more manageable,” said Scholz at an event organised by SPD local politicians in Berlin.
The basic principle of the debt brake is correct, said Kukies, as it ensures budgetary discipline during the good years and allows sufficient financial leeway during times of crises.
Nevertheless, it makes sense to look at the various proposals and evaluate what makes sense to be able to finance the necessary long-term investment needs, added Kukies.
And “even if we did not have a debt brake, we would still be subject to the European debt rules,” added Kukies.
“These also require prioritisation because they limit the increase in government spending and require a solid budget policy,” Kukies said, adding that he would campaign for Germany to be given more time to submit its spending plans under the new EU debt rules with a view to elections planned for February.
(Reporting by Andreas Rinke, Writing by Miranda Murray and Maria Martinez; Editing by Kim Coghill and Toby Chopra)
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