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FINANCE

Debt-averse Germany to take on new borrowings to soften pandemic blow

The German government will seek to suspend a constitutional rule against the state taking on new debt for the third year in a row in 2022, AFP learned from ministry sources Monday, as Berlin looks to soften the economic blow of the pandemic.

Debt-averse Germany to take on new borrowings to soften pandemic blow

Europe’s largest economy will borrow 81.5 million in 2022, breaking its so-called “debt brake” rule, which forbids the government from borrowing more than 0.35 percent of gross domestic product (GDP) in a year.

In 2021, Berlin is set to take on 240.2 million of additional debt, around a third more than initially forecast in December.

Having originally planned to halt borrowing in 2022, the government is now aiming to return to its constitutionally enshrined fiscal discipline a year later, with only 8.3 billion of new debt in 2023.

The budget adjustments drawn up by the finance ministry will be presented to the cabinet on Wednesday and would then require approval from parliament.

Germany smashed its domestic taboo on new government borrowing in 2020 and 2021 as it scrambles to shield businesses and workers from the economic hit of the coronavirus.

READ ALSO: ‘Doing nothing would be more expensive’: Germany to take on debt again in 2021

The German economy suffered its biggest contraction in 2020 since the 2009 financial crash because of the pandemic, although the decline was smaller than the slumps seen in other European countries.

Yet hopes of a recovery this year have been hit by ongoing shutdown measures which have seen entire sectors of the economy idled for months, with the government revising down its 2021 growth forecast to 3 percent in January.

As a third wave of the pandemic tears through Europe, the government is expected to extend and tighten lockdown measures into April following a meeting between Chancellor Angela Merkel and regional leaders on Monday.

READ ALSO: EXPLAINED: These are Germany’s planned new lockdown measures

The issue of taking on new debt, which has long been a fundamental red line for Chancellor Angela Merkel’s government, has also sparked heated debate at the beginning of an election year in 2021.

In January, Merkel’s chief of staff Helge Braun caused a major ruckus within his own party when he suggested that the rule on fiscal discipline should be lifted for several years to come.

READ ALSO: Row breaks out over call to ease Germany’s ‘debt brake’ for years

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MONEY

Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.

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