Germany’s Merkel Voices Support for Reform of Debt Brake Policy
(Bloomberg) -- Former German Chancellor Angela Merkel and Bavaria’s prime minister, Markus Soeder, said they’re open to reforming the country’s strict borrowing limits, signaling a departure from the traditional stance of the conservative Christian Democrats, who are leading in polls ahead of an election in February.
Merkel said there’s a case for limited relaxation, arguing that Germany needs to increase defense spending and invest in areas where it lags behind to maintain social peace.
“What is important is a reform that only allows debt for investments and not for further social spending,” she said in an interview with Redaktionsnetzwerk Deutschland.
Sepatarely, Soeder told Stern magazine in an interview published Tuesday that he’s in favor of reforming debt rules as long as federal and state spending rules are aligned.
The remarks add to a growing debate about the so-called debt brake, long championed by conservative politicians. Two weeks ago, Friedrich Merz, the Christian Democrat candidate for chancellor, signaled openness to reform to give the government more wiggle room.
The rules, established in 2009 following the global financial crisis, limit net new borrowing to no more than 0.35% of GDP to help keep the budget deficit in check. Exceptions are allowed during national emergencies or recessions.
Debate around loosening the framework has intensified as the country heads toward February’s snap election, with even Merz, who is leading in opinion polls, acknowledging the need for more flexibility to help in areas such as infrastructure, energy and defense.
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