Germany Mulls a ‘Shadow Budget’ to Add Debt

Germany Mulls a ‘Shadow Budget’ to Add Debt

The Fiscal Times/iStockphoto

With its economy on the verge of recession and interest rates at historical lows, German officials are looking into ways to evade the strict limits placed on federal spending.

Germany’s so-called “debt brake” budgetary law allows the federal deficit to equal as much as 0.35% of gross domestic product, Reuters reports, but that translates to just 5 billion euros per year, far less than the 138 billion euros worth of infrastructure investment experts say the country needs. New, independent public agencies focused on infrastructure improvement would be able to get around that limit by operating under a “shadow budget” that is separate from the federal budget. Such a move would allow the country to ease the conditions of austerity that have been in place since the recession. 

"Norway has its oil, Germany has its credit standing. It's like a national resource," a senior official told Reuters. Noting that German interest rates are currently negative, the official added, “If managed wisely, an independent public investment agency could even make money by taking on new debt.”