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Germany boosts borrowing to tackle Ukraine war costs

Lamya Abdulla
26 April 2022, MVT 12:46
People walks on a street with several dead bodies on the ground a street in Bucha, northwest of Kyiv, as Ukraine says Russian forces are making a "rapid retreat" from northern areas around Kyiv and the city of Chernigiv, on April 2, 2022. -- Photo: Ronaldo Schemidt / AFP
Lamya Abdulla
26 April 2022, MVT 12:46

Germany will take on an additional 39.2 billion euros ($42.1 billion) of debt in 2022 to counter the economic impact of the war in Ukraine, sources in the finance ministry said Monday.

The supplementary budget, set to be put to the cabinet on Wednesday, will raise the total of new borrowing for the year to 138.9 billion euros.

The additional debt package was a "timely and targeted" response to the outbreak of war in Ukraine, the sources said, with the money intended to help businesses and households deal with rising energy costs as a result of the war, as well as financing humanitarian aid to Ukraine.

After years of chasing balanced budgets, traditionally frugal Germany took on huge amounts of debt in 2020 and 2021 to help Europe's biggest economy cope with the coronavirus pandemic, lifting its constitutionally enshrined debt limits to do so.

The government had planned to take on 99.7 billion euros in 2022 as part of its "core" budget, but the war in Ukraine has forced Germany to adjust its calculations.

At the beginning of April, the government agreed a 5-billion-euro support packet for business to help tackle rising energy costs.

Households will also receive a check to help match the increase in their bills.

Humanitarian aid for Ukraine was also included among the new spending items, while the government has set about building up gas reserves to reduce its dependency on supplies from Russia.

In total, 26.3 billion of the new debt consists of new spending, while the other 12.9 billion euros is to account for lower tax receipts as businesses suffer the impact of the war.

The government still aims to reinstate and stay within its debt rules in 2023, limiting the amount of new debt to 7.5 billion euros.

© Agence France-Presse

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