The three German parties working on forming a new coalition government are talking about raising federal borrowing next year to enable a one-time multi-billion-euro infusion into the government's climate investment fund, two sources said.
The centre-left Social Democrats (SPD), the environmentalist Greens, and the pro-business Free Democrats (FDP) are facing a big spending dilemma after agreeing in exploratory discussions to revert to strict debt limits from 2023 and prevent tax rises.
Two sources familiar with the negotiations said that to increase fiscal firepower, the parties are considering using the emergency clause for the debt brake rule in the constitution for the third year in a row and take on more debt than the initially anticipated 100 billion euros ($115.92 billion) in 2022.
One of the insiders stated, "the idea is to supercharge the government's Special Energy and Climate Fund (EKF) with a one-time, debt-financed injection of several billion euros that might then be tapped step by step over the following years."
The plan would allow parties to avoid creating off-budget investment vehicles, which had been proposed as a way to get around debt limits and allow for more public investment to accelerate the transition to a green economy.
While Chancellor Angela Merkel's government used the COVID-19 pandemic to justify suspending debt limitations in 2020 and 2021, the next government could now use the climate crisis to invoke the emergency clause, according to one of the sources.
Following the SPD's election triumph, Finance Minister Olaf Scholz, who is expected to succeed Merkel, took on record new debt of 130 billion euros last year and is planning to borrow up to 240 billion euros this year.