Top official sees need for more prolonged German deficit spending

Deficit spending by the German government may be may continued for longer than some observers might have been expecting after the Covid-19 pandemic.

At the start of the week, the country's deputy finance minister, Werner Gatzer, said in a speech that "a balanced budget isn’t obligatory.

"We should return to normality. But normality isn't necessarily a black zero."

His comments were seen by some as an admission that Berlin was rethinking its balanced budget strictures from before the pandemic.

Germany broke with past practice in response to the novel coronavirus pandemic, budgeting approximately €218bn of new debt for 2020 and, according to people familiar with the matter, a further €80bn for 2021, Bloomberg reported.

Pointing to the need to digitalise the German economy and achieve environmental sustainability, Gatzer added: "The transformation process can't be allowed to fail because of funding.

"The black zero is good, but it isn’t decisive for economists in mastering the challenges."

However, the official went on to clarify that: "this isn't about taking on as much debt as possible.

"The constitutional debt brake will have to be re-implemented. Interest rates are at a level that allow us to afford it. My goal is to make suggestions to the government to respect the debt brake again."