Merkel's chief of staff triggers debt brake debate among German conservatives

BERLIN: Conservative lawmakers on Tuesday defended the principles underpinning Germany's debt issuance law, after Chancellor Angela Merkel's chief of staff said Berlin would be unable to stick to its strict limits on borrowing for several more years.

Parliament suspended the law, enshrined in the constitution and normally restricting new federal borrowing to 0.35% of economic output, for 2020 and 2021 due to the COVID-19 pandemic.

Helge Braun's comments, in an op-ed piece for business daily Handelsblatt, hinted strongly at moves within the government to carry on spending more freely once the coronavirus crisis - during which it has propped up the economy with unprecedented support packages - is over.

"The debt brake cannot be adhered to in the coming years even with otherwise strict spending discipline," Braun wrote.

A government spokesman called the comment Braun's personal opinion contributing to the wider debate, while several senior conservatives responded negatively to it.

Eckhardt Rehberg, spokesman on budget issues for Merkel's CDU party in the lower parliamentary house, said its lawmakers continued to support the debt brake and viewed fiscal sustainability as non-negotiable.

"The cause of the euro zone crisis was not too little but too much debt," Rehberg said, adding that limiting public debt was also a matter of fairness towards the next generation.

Christian Ploss, CDU leader in Hamburg state, told Reuters it was "the party of fiscal prudence ... and this should stay that way", while Markus Soeder, leader of its Bavarian CSU affiliate, told Die Welt newspaper any "permanent" suspension of the debt brake would send the wrong signal.

Berlin took on net new debt of 130.5 billion euros ($158.3 billion) in 2020, the highest annual borrowing in its post-war history, and Finance Minister Olaf Scholz plans to increase that to up to 180 billion euros this year.

Braun suggested lawmakers should allow more debt to be issued for a few more years. But there should be a "clear date" for the rule to kick back in again.

Sven-Christian Kindler, chief budget lawmaker of the opposition Greens, said a reform of the debt brake to increase public investment was long overdue.

Polls suggest the Greens are on course to become the conservatives' junior coalition partner following elections in September, when Merkel will stand down as chancellor.

Scholz will present a proposal for next year's federal budget in March, but the final say on its composition will go to the parliament and coalition government that emerge following the election.