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BUDGET

Paris, Berlin agree on future eurozone budget: French ministry source

France and Germany have agreed on the broad outlines of a proposed eurozone budget which they will present to EU finance ministers in Brussels on Monday, a French finance ministry source said.

Paris, Berlin agree on future eurozone budget: French ministry source
French Economy and Finance Minister Bruno Le Maire (R) and German Finance Minister and Vice-Chancellor Olaf Scholz. File photo: AFP

The common single-currency budget was one of French President Emmanuel Macron's key ideas for protecting the euro, but it caused differences between France and Germany, the region's two largest economies.

French Finance Minister Bruno Le Maire and Germany's minister, Olaf Scholz, will “jointly present a proposition on Monday… about the layout for a budget for the eurozone,” the ministry source told AFP.

“It's a major step forward,” the source said. “We will look forward to sharing with other members.”

The source said the amount of the budget has not been established as the proposal was to first set out the “architecture and main principles” of the budget.

According to a copy of the French-German proposal, the budget would be part of the EU budget structure and governed by the 19 euro members.

Macron will travel to Berlin at the weekend to meet with German Chancellor Angela Merkel where the two leaders will bolster their alliance as champions of a united Europe.

READ ALSO: France and Germany push for compromise on eurozone reform

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FINANCE

‘We’ll be struggling well into next year’: German borrowing to soar amid pandemic

Germany on Friday passed a 2021 budget that once again smashes its "debt brake" rule, promising to shield businesses and workers from the economic hit of the pandemic as cases continue to rise.

'We'll be struggling well into next year': German borrowing to soar amid pandemic
The seating area of a restaurant closed off in Boltenhagen on the Baltic Sea coast. Photo: DPA

Chancellor Angela Merkel's government plans to borrow €300 billion ($364 billion) across 2020 and 2021 combined after the government pledged more than a trillion euros in aid, including through short-time work schemes (Kurzarbeit) and business support.

“The budget is the basis for everyone to be confident that we can provide the necessary economic and social support to get us through this crisis together,” Finance Minister Olaf Scholz told lawmakers.

The budget for 2021, which passed with 361 votes in favour to 258 against, provides for a total of €179.8 billion in new loans and nearly €500 billion in public spending.

It means for both 2020 and 2021, Germany will abandon its cherished “debt brake”, a constitutionally enshrined rule that forbids the government from borrowing more than 0.35 percent of gross domestic product (GDP), before planning to return to no new debt in 2022.

Restrictions to curb the second wave of Covid-19 – including shutting the food-and-drink, leisure and cultural sectors – continue to burden the economy, which previously pushed Berlin to amplify its aid to businesses.

Yet case rates continue to climb. On Friday, Germany reported a record nearly 30,000 new infections and almost 600 deaths in a 24-hour period.

Now, Merkel is facing calls to tighten restrictions again.

READ ALSO: Germany mulls three-week lockdown from December 20th

Aid can't be 'endless'

Despite the “ray of hope” of a vaccine rollout, Scholz said, “we know that… we're going to be struggling well into next year with the health, economic and social challenges that are going to follow from this pandemic.”

Businesses hit by the current closures are entitled to claim aid amounting to up to 75 percent of their revenues for November and December 2019, expected to cost the government some 30 billion euros.

However Economy Minister Peter Altmaier said last week that support for pandemic-hit firms implemented through November and December could not go on “endlessly”.

Nevertheless Altmaier on Friday said he aimed to increase the ceiling for aid from January in the case of a harder lockdown.

Germany's debt-to-GDP ratio will climb to 70 percent this year, Germany's central bank said in a report published Friday.

But public finances will likely improve as coronavirus measures come to an end, it said.

The government expects the economy to shrink by 5.5 percent this year, before rebounding by 4.4 percent next year.
 

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