The German public deficit will widen to 3.25% of GDP in 2023, against 2.5% forecast for this year, due in particular to the energy crisis which is pushing Berlin to spend lavishly to support households and businesses, indicated the Minister of Finances.
‘For this year the projections amount to a 2.5% deficit. Next year (…), we will see a deficit of 3.25%, ‘said Christian Lindner on Friday during a press conference.
The deficit could even reach 4.5% in 2023, depending on “the scale of spending” to freeze “gas and electricity prices”, he added.
“We made enormous efforts during the crisis to relieve people and avoid structural ruptures,” commented Mr. Lindner to justify this widening of the deficit.
But Germany, guardian of budgetary rigor within the EU, promises a “normalization of public finances” for 2024, according to the Ministry of Finance.
The German economy is particularly affected by the war in Ukraine and its consequences in terms of energy, which weigh on its industrial sector and weigh down the purchasing power of households.
Recession threatens next year: the government expects a 0.4% drop in GDP for the euro zone’s largest economy.
Berlin has therefore released a giant special fund of 200 billion euros to block energy prices, which will be used in 2023 and 2024.
And the government presented a 2023 budget in November containing 45.6 billion euros in new debt, against only 17.2 billion euros estimated last June.
debt brake
However, this budget will be the first in three years to officially respect the debt brake rule, which prohibits the state from borrowing more than 0.35% of its GDP each year.
This obligation, a real totem for Liberal Minister Christian Lindner, had been lifted from 2020 to 2022 to deal with the coronavirus pandemic which forced Germany to break the lock of rigor.
But to return to this rule, the government has resorted to a veritable balancing act, by not counting special funds, such as the 200 billion euro energy package, in the official budget.
The German Finance Minister is one of the most reluctant to the relaxation of European budgetary rules currently being negotiated by the Twenty-Seven.
The Maastricht Treaty provides for Member States with a general government deficit limited to 3% of national GDP and a public debt capped at 60% of GDP.
The crisis linked to the Covid-19 pandemic has shattered these rules, which remain suspended until the end of 2023.
/ATS