(Bloomberg) —
Germany may borrow as much as 350 billion euros ($370 billion) in an unprecedented financing push to cushion the fallout from the coronavirus pandemic.
Chancellor Angela Merkel’s government will borrow 150 billion euros this year to finance measures to limit the impact of the outbreak. A rescue fund set up to buy stakes in companies and fund corporate loans could issue up to 200 billion euros in additional debt if needed, Deputy Finance Minister Joerg Kukies said in an interview with Bloomberg. The ultimate size of the rescue fund’s borrowings depends on how many companies ask for government help.
“The extent of the federal government’s actual borrowing under the rescue fund is currently not foreseeable, since this depends on the extent to which companies will make use of rescue funds,” said Kukies. “It could also be significantly lower.”
The 150 billion euros in new debt is part of a supplementary budget that is expected to be approved Monday by Merkel’s cabinet. It will be presented to the lower house on Wednesday in an emergency session and could move on to Germany’s upper house on Friday.
As the devastating implications of the pandemic become clear, Merkel’s ruling coalition is abandoning a long-standing commitment to balanced budgets and using emergency powers to suspend rules restricting borrowing that are enshrined in the constitution. The economy could shrink by at least 5%, according to an estimate by the finance ministry.
The effort to shore up Europe’s largest economy includes measures such as direct assistance to companies and low-income earners as well as a rescue fund to bailout virus-hit businesses. A lockdown could further restrict activity.
Merkel is speaking with state leaders on Sunday to hammer out a more coordinated approach to slow the spread of the virus, which as infected nearly 22,000 in the country, according to Bloomberg calculations.
