After earmarking up to €750 billion for emergency spending due to the growing coronavirus crisis, the government plans to return to its controversial policy of no new debt as soon as the pandemic is over.
Image: picture-alliance/dpa/F. Molter
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The German government would return to its savings policy once the coronavirus pandemic crisis was over, Economy Minister Peter Altmaier told the country's ZDF broadcaster on Tuesday, adding that Europe's largest economy had committed to paying debt back from 2023 onward.
"Once the crisis is over, and we hope this will be the case in a few months, we will return to our austerity policy and, as soon as possible, to the balanced budget policy," Altmaier said.
Only the day before, the government in Berlin agreed to a comprehensive package worth up to €750 billion ($812 billion) to mitigate the damage of the coronavirus outbreak on the economy. It is the first time the country is set to take on new debt since 2013 and the background to Altmaier's comments.
Come what may
The country's ambition of always having a balanced budget has been controversial and criticized from many sides for spending too little. Now that Germany is taking a huge economic hit from the ongoing coronavirus crisis, the criticism is only increasing.
The government expects the pandemic to plunge the economy into recession. Finance Minister Olaf Scholz has said his newest budget plans are based on predictions that gross domestic product (GDP) will shrink by roughly 5% this year.
'Father of the black zero': Germany's love affair with austerity
Former Finance Minister Wolfgang Schäuble was "the face" of the black zero, which came to be the most visible symbol of Germany's national obsession with a balanced budget.
Image: picture-alliance/dpa/B. Weissbrod
Father of austerity
Former Finance Minister Wolfgang Schäuble was "the face" of the black zero. His 2014 financial plans led to Germany not taking on new debt for the first time since 1969, resulting in a balanced budget. It was achieved by financing spending hikes solely with revenues while reducing public debt.
Image: picture-alliance/dpa/W. Kumm
Have your cake
Germany's appreciation for penny-pinching to ensure it didn't rack up fresh debt elicited many wacky homages. Seen here is a "black zero" cake presented to the state parliament of Lower Saxony by the neoliberal Free Democrats (FDP) in 2015.
Image: picture-alliance/dpa/H. Hollemann
'Debt brake' introduced in 2009
In 2009, Germany's constitution was amended to include a "debt brake," ("Schuldenbremse"), despite economists largely agreeing that it does not reduce economic volatility. German states were not permitted to run any structural deficits, and the federal government could only run a structural deficit of less than 0.35% of GDP.
Image: picture-alliance/dpa/R. Jensen
Debt or guilt?
It is something of a linguistic testament to a cultural truth that the German word for debt, Schuld, is also the word for guilt. Germans are content to live with decaying infrastructure, renting instead of buying and not having modern-style credit cards if it means reducing debt. Here, Baden-Württemberg's then-Finance Minister Nils Schmid celebrated the "black zero" with a statue in 2014.
Image: picture-alliance/dpa/B. Weissbrod
'Black zero' questioned
When Germany was thought to be heading toward recession in 2019, the wisdom of a balanced budget was challenged. Germany's resistance to spending and investing created an economy with little room for innovation, expansion or for startups to flourish. According to the keenly watched ifo Business Climate Index "not a single ray of light was to be seen in any of Germany's key industries" that year.
Image: Imago Images/C. Ohde
EU neighbors suffer
Germany's penchant for a balanced budget not only hindered investment in the country, it also affected its neighbors. As an export-driven economy, Germany profits from exporting goods, but insufficient reinvestment of all that extra capital, paired with a low-wage policy that stymied spending, meant the surplus remained stubbornly high, at the expense of other EU countries.
Image: Imago Images/S. Steinach
Point of pride
Across Germany, being debt-free has been marked with strange celebrations, including members of the Christian Democrats posing with a cardboard cutout of a black zero. The city of Dusseldorf even kept a clock marking how many years it has been debt-free, seen here in March 2016. (This gallery was updated on December 27, 2023, on the occasion of Wolfgang Schauble's death.)
Image: picture-alliance/dpa/M. Hitij
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The government has announced a range of measures to cushion the blow for companies during the crisis. Trying to reassure firms and freelancer workers, Altmaier said by next week it should be clear where they can obtain aid to help tide them over during the crisis and that German authorities were trying to avoid bottlenecks.
"It should be as unbureaucratic as possible," he said, reiterating that the government was doing what it could to ensure that coronavirus does not lead to job losses.
Altmaier emphasized that with the billions in aid approved by the cabinet that there were "tailor-made" offers for companies of all sizes. However, he couldn't issue a job guarantee, saying it was the decision of private employers whether they accepted the government offers "or whether they decided to lay off workers."
The big if
As a last resort Altmaier also said the government was prepared to buy stakes in companies in order to keep them from going out of business or protect them against takeovers, but only in special and extreme cases.
"This is only the very last resort and only conceivable as an emergency solution when companies get into trouble and this also endangers German vital interests," he said.
It was a warning shot against speculators or foreign investors that there were no "bargains" to be had in the country at the moment.
