Reuters
Is Germany about to end its spend-thrift ways?
Reuters, citing an unnamed senior government official, stunned markets with a report saying the country might issue new debt — and end a commitment to a balanced budget — to fight climate change.
Germany has been notoriously reticent to either spend or cut taxes, drawing the ire of the United States, International Monetary Fund, and others.
The government official did stress that any new debt would strictly be limited to climate protection.
Only last week Germany adopted a 2020 budget which forecast no net borrowing.
The yield on the 10-year German bond TMBMKDE-10Y, +4.53% , or bund, rose after the story was published, though the yield was still negative.
Germany’s top stock market index, the DAX DAX, +1.68% , climbed as well.
Such a move by German could have big implications not just for the eurozone’s top economy but its neighbors as well.
“With the economy growing below potential in Germany and the eurozone as a whole and the ECB potentially close to the effective lower bound for policy, German fiscal policy could boost growth directly and allow other eurozone governments to follow suit,” said economists at Citi.
However, Germany’s finance ministry said in response to the media report that there has been no government decision to abandon its policy of running a balanced budget, according to Bloomberg. The government is scheduled to meet Sept. 20 to discuss its next measures.
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