Germany passes extra stimulus budget

Germany's cabinet agreed an extra budget to finance its major stimulus package on Wednesday (June 17).

The finance ministry says it will push Berlin's overall new borrowing to a record level of just over 218 billion euros - or around $245 billion.

It's the second supplementary budget Germany has passed in three months.

The aim is to boost economic recovery after the downturn caused by the outbreak.

It all marks Germany’s shift from Europe’s austerity champion to one of the biggest spenders among the euro zone’s efforts to rebound from the virus.

Finance Minister Olaf Scholz said they could afford it because the government had reduced its debt burden in good times, and now had solid public finances.

"It will be more now and we will increase net borrowing, compared to the first supplementary budget, by 62.5 billion euros. That's a lot of money. I believe in this situation it must be underlined that we believe this is absolutely right. We believe the size is right and less would not be enough."

He also said Germany was benefiting from record-low borrowing costs.

This would push down Berlin's bill for debt servicing to 9 billion euros this year from 12 billion last year.

That's despite the record new borrowing.

Germany now plans to sell 218.5 billion euros of additional debt this year, equivalent to 6.5% of economic output.

It also expects its debt-to-GDP ratio to jump to around 77% in 2020, from just below 60% in 2019.

The government is planning stimulus measures worth more than 130 billion euros overall.

The majority will be put in place in the second half of this year.

It will include a temporary cut in VAT and cash handouts for parents.