German MPs tear up fiscal rule book, pass huge coronavirus aid budget

German lawmakers approved on Wednesday an emergency budget financing a coronavirus aid package that foresees 156 billion euros (167 billion dollars) in new debt, in a historic move that flouts the country’s long-held fiscal rules.

The record debt covers 122.8 billion euros in aid for businesses and health services. It also takes into consideration an expected drop of around 33.5 billion euros in tax revenues as the pandemic takes its toll on Europe’s largest economy.

In order to allow the spending plans, lawmakers also voted to suspend Germany’s so-called debt brake, anchored in the constitution, which limits structural net borrowing to 0.35 per cent of gross domestic product.

The coronavirus budget passed by the Bundestag on Wednesday exceeds that limit by about 100 billion euros. A number of lawmakers while speaking about the proposals acknowledged they may need to expand the unprecedented aid package.

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They convened under strict distancing measures in the Bundestag to vote on a number of measures aimed at bolstering the country’s economic and medical defences against the coronavirus.

The Bundesrat upper house is scheduled to vote on the measures on Friday.

Among other things, the emergency budget finances a 600-billion-euro bailout fund for large firms to help them weather the coronavirus crisis.

Under the legislation, which harks back to Germany’s response to the 2008-09 financial crash, companies are to be propped up with loans and nationalized where necessary for the duration of the crisis.

Lawmakers also approved other emergency measures, including a further 3 billion euros in funding for hospitals and changes to German insolvency law so that companies are less likely to go bankrupt.

Wednesday’s sitting began with a 90-minute debate, with Chancellor Angela Merkel’s deputy, Finance Minister Olaf Scholz, speaking on her behalf because she is in home quarantine after coming into contact with someone who tested positive for the virus.

Scholz passed on Merkel’s “regards from home office,” before outlining the government’s position: “Hard weeks lie ahead. And yet, we will overcome them.”

The chancellor is doing well, her spokesman Steffen Seibert later said, adding that she is in close contact with her cabinet and staff.
Merkel’s first test for coronavirus was negative, but further testing is planned, Seibert said.

More than 37,000 cases of coronavirus infection have been confirmed in Germany so far, according to dpa’s own research. More than 200 of those cases were fatal.

The relatively low death toll compared to countries such as Italy, the worst-hit nation in the global pandemic, has sparked speculation as to the potential reasons, including Germany’s aggressive testing strategy and its relatively well-prepared intensive-care system.

In its latest briefing, the government’s disease control agency said it was too early to say whether Germany was slowing the viral spread, after figures earlier in the week appeared to show a flattening in the growth curve regarding new cases.

However, Robert Koch Institute President Lothar Wieler warned against complacency. “We must wait further in order to see whether the measures are working,” he said, adding that Germany is still in the early stages of an epidemic.

Germans have been urged to stay at home and only leave the house where necessary to buy food or run important errands. (dpa)