German chancellor shows support for debt brake reform in the future

By Thomson Reuters Apr 27, 2024 | 7:40 AM

BERLIN (Reuters) – German Chancellor Olaf Scholz said for the first time on Saturday that he supports a reform of the country’s constitutionally-enshrined debt brake, but does not currently see any possibility of doing it right now.

Altering the rules of the debt brake, which limits public deficits to 0.35% of gross domestic product, would require a two-thirds majority in the upper and lower houses of parliament.

The brake is fiercely defended by Scholz’ coalition partner Free Democrats (FDP), and earlier this week the chancellor himself had also seemed more sceptical about reform.

However, several state leaders of the opposition conservatives have said they are open to change because, unlike the federal government, the states are no longer allowed to incur any new debt.

“I believe that it would not be written as it is in the constitution today,” Scholz said about the debt brake at an event of his Social Democrat party.

“This is an insight that is also growing more and more. And that’s why I believe that when times are calm and everyone looks at it together, there is an opportunity to reform it,” Scholz said.

He indicated there was currently still resistance to reform by the FDP and the federal leaders of the opposition conservative Christian Democratic Union CDU/CSU.

“To be honest, it doesn’t look like there is much willingness at the moment,” Scholz said.

At the same time, the SPD politician emphasized that he definitely wanted to stick to the debt brake in the 2025 budget. “We shouldn’t march around without any rules at all.”

Germany stuck to the debt brake in 2024 for the first time after four consecutive year in which it was suspended to allow for extra spending needed due to the coronavirus pandemic and the energy crisis following Russia’s invasion of Ukraine.

“I believe we must now solve our problems without amending the constitution,” Scholz said, in reference to the coalition negotiations for the 2025 budget.

(Reporting by Andreas Rinke, writing by Maria Martinez; Editing by Toby Chopra)