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Healthcare

UPDATE 1-Germany likely to suspend debt brake also next year -Scholz

(Adds Scholz, background)

BERLIN, March 1 (Reuters) - Germany is likely to suspend constitutionally enshrined limits on new borrowing again next year to finance more rescue and stimulus measures to help the economy recover from the COVID-19 pandemic, Finance Minister Olaf Scholz said on Monday.

Speaking at a news conference to present the election manifesto of his centre-left Social Democrats (SPD), Scholz said one of the main goals was to keep public investments high in infrastructure, climate protection and digitalisation.

Asked whether he was planning to suspend the so-called debt brake, which limits new borrowing to a tiny fraction of economic output, for a third year in a row in 2022, Scholz said he would present next year’s draft budget on March 24.

But Scholz added that officials involved in the budget planning all had the impression that “the economic development is likely to make it necessary that we’ll again make use of the possibilities in the constitution next year and ensure that we can counter the effects of the crisis”.

His comments suggest that Berlin is set to continue massive deficit-spending also after a federal election in September and that a return to the fiscal rules is off the table. Parliament suspended those rules for 2020 and 2021 to allow combined new borrowing of up to 310 billion euros ($373.18 billion) in both years.

Armin Laschet, the new leader of Chancellor Angela Merkel’s conservatives and the man in pole position to succeed her, said last week there was probably no other way but to shelve the debt brake again next year - and maybe even beyond that.

The European Union is also likely to waive limits on borrowing by member state governments again in 2022, given persistent uncertainties about the pace of economic recovery once the coronavirus pandemic is contained. ($1 = 0.8307 euros) (Reporting by Michael Nienaber Editing by Joseph Nasr and Mark Heinrich)

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