U.S. Markets closed

Merkel’s Coalition Partner Open to Debt-Spending Boost: FAS

Chris Reiter

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

German Chancellor Angela Merkel’s government should be open to raising debt to counter an economic slump, a leading lawmaker from her junior coalition partner said in an interview with Frankfurter Allgemeine Sonntagszeitung.

“We should take advantage of the opportunities offered by a long period of low interest rates,” Rolf Muetzenich, the interim caucus head of the Social Democrats, said in an interview with the newspaper published Sunday. “We have to act practically. The banking crisis of 2008 has shown that the state must counteract a dip in the economy. We will make the decisions wisely, when needed.”

Muetzenich’s comments are the latest sign that Germany’s rigid adherence to its balanced-budget policy is softening, as its economy teeters on the brink of recession. While the government is expecting a recovery toward the end of the year, Merkel’s administration is preparing fiscal stimulus measures that could be triggered by a deep recession, people with direct knowledge of the matter have said.

Amid persistent criticism and doubts about the stability of Merkel’s government, the senior SPD politician called the coalition’s work “very convincing.”

A planned review of the alliance between Merkel’s CDU-led bloc and the Social Democrats needs to focus on what the parties can still accomplish together in the next two years, he said, referring to open issues in climate policy, infrastructure, digitalization and Europe.

“When Social Democrats can assert their ideas and make people’s lives better, that is always a strong argument” to remain in the coalition, said Muetzenich.

To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Rachel Graham, James Amott

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.