Germany ready to ditch balanced budget in case of recession

Germany’s  coalition government would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession, according to a report in Der Spiegel magazine.

Fears are mounting that Europe’s largest economy could slide into a recession after slumping exports due to a global slowdown, tariff conflicts and Brexit fears translated into a contraction of 0.1% in the second quarter.

Chancellor Angela Merkel said on Tuesday she did not see any need for a fiscal stimulus package to counter the effects of a slowing economy. She added that her government remained committed to a high level of public investment.

Germany has for years faced calls from its euro zone partners and the International Monetary Fund to increase public spending, which would stimulate the economy of the whole monetary union.

Germany has had a balanced budget since 2014, a fiscal rule introduced by former conservative finance minister Wolfgang Schaeuble and stuck to by his Social Democrat successor Olaf Scholz.

Via RTE/Reuters/ Der Spiegel