Bloomberg News

Germany Plans Joint Federal-State Debt in Merkel Fiscal Deal

June 24, 2012

Chancellor Angela Merkel agreed to share borrowing costs with Germany’s states to help ease their budget squeeze, completing a deal the opposition said will help secure German ratification of the European Union’s fiscal pact.

Germany’s federal and state governments plan their first joint debt sale in 2013 to help the states meet the pact’s deficit limits, the German government’s press office said in an e-mailed statement in Berlin today.

Pressed by the Social Democrat-led opposition that could block the stricter European fiscal rules in parliament, Merkel agreed to a policy she opposes in confronting the debt crisis in the rest of the 17-nation euro area. She signaled her rejection of joint euro-area debt as recently as June 23, saying “liabilities and controls” must “go together.”

“We reached a solution that makes it clear there will be approval” of the fiscal pact in the upper house of parliament, Kurt Beck, the premier of Rhineland-Palatinate state and member of the opposition SPD, said in an ARD television interview.

Besides the so-called Deutschland bonds, concessions by Merkel’s coalition include 580 million euros ($729 million) in one-time federal aid to local governments and a commitment of 75 million euros annually for day care, and an unspecificed amount of federal help to states to care for the elderly, Beck said.

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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