German Bundestag pursues balanced 2020 budget as downturn looms

Members of the German Bundestag (federal parliament) debated the country’s draft budget for 2020 presented by Finance Minister Olaf Scholz .

According to Scholz’s plans, Germany will spend around 360 billion euros (397.5 billion U.S. dollars) in 2020. The draft budget is focused on employment and social affairs as well as on measures to relieve the burden on low-income families.

“We will use the low interest rates for an expansive economic policy,” Scholz told the Bundestag, stressing that Germany would achieve this “within a framework in which we do not create additional debt.”

The balanced federal budget pursued by Scholz, without any fresh borrowings, is often referred to in Germany as “black zero” policy, which the German government has adhered to since 2014.

Tobias Hentze, an economist at the German Economic Institute (IW), commented that the Finance Ministry could “only avoid new debts with tricks,” such as removing more than 9 billion euros from a fund for migrants.

Before the Bundestag debate, the conservative CDU-CSU union described the draft budget as containing “large structural gaps,” while the German opposition parties criticized Scholz’s draft for setting the wrong priorities.

“This is a budget of broken promises,” noted Christian Duerr, deputy leader of the German Free Democratic Party’s (FDP) parliamentary group. He said that the state pension fund would account for one-third of the entire federal budget in 2020, while the education budget would shrink by around 70 million euros.

Dietmar Bartsch, leader of the Left Party’s group in the Bundestag, spoke of a “budget of standstill,” while the head of the Green Party’s parliametary group, Katrin Goering-Eckardt, stressed that the budget did not address the “most urgent question” of the climate crisis.

Finance Minister Scholz defended his draft budget by stressing that the German government had created a basis of solid finances that would enable it to act in an economically difficult situation.

“From my point of view, it is especially important that we are able, using the solid financial basis we have today, to counteract the outbreak of an economic crisis in Germany and Europe,” noted Scholz.

While he emphasized that there was currently no crisis, the German and global economies have cooled this year due mostly to the global trade dispute between the United States and China.

This dispute has been “going on for too long,” argued Scholz, stressing that “all around the world, companies are waiting for positive signals.”

Economic experts at the IW warned that “the pressure to act has long since intensified due to the ongoing economic downturn.”

The latest government forecast for tax revenues in 2020 was around 6 billion euros lower than the previous projection, while the new tax revenue estimate by the German government, to be announced in November, “is likely to dampen the expected revenues once again,” according to the IW.

Since the government wants to increase expenditures in several areas, including defense, development aid and innovation, Germany’s finance minister has “already said goodbye” to a balanced national budget.