Merkel's chief of staff triggers debt brake debate in conservative camp

BERLIN, Jan 26 (Reuters) – Conservatives on Tuesday rejected a call to ease Germany’s constitutionally mandated debt issuance limits made by Chancellor Angela Merkel’s chief of staff, who said Berlin would be unable to adhere to the strict fiscal rules for some years.

The comments by Helge Braun, in an op-ed piece for business daily Handelsblatt, were the clearest sign yet that the government is seeking leeway to spend more freely once the coronavirus crisis – during which it has propped up the economy with unprecedented support packages – has been overcome.

“The debt brake cannot be adhered to in the coming years even with otherwise strict spending discipline,” Braun wrote.

Parliament suspended the rule, which normally limits new federal government borrowing to 0.35% of economic output, for 2020 and 2021 due to the COVID-19 pandemic.

Eckhardt Rehberg, spokesman on budget issues for Merkel’s conservatives in the lower parliamentary house, said the party’s lawmakers continued to adhere to it and viewed fiscal sustainability as non-negotiable.

“The cause of the euro zone crisis was not too little but too much debt,” he said.

Christian Ploss, CDU leader in the state of Hamburg, agreed the rule must not be relaxed. “The CDU is the party of fiscal prudence … and this should stay that way,” he told Reuters.

Berlin took on net new debt of 130.5 billion euros ($158.3 billion) in 2020, the highest annual borrowing in its post-war history, and Finance Minister Olaf Scholz plans to increase that to up to 180 billion euros this year.

Braun suggested lawmakers should allow more debt to be issued for a few more years. But there should be a “clear date” for the rule to kick in again.

Sven-Christian Kindler, chief budget lawmaker of the opposition Greens, welcomed Braun’s proposal, saying a reform to increase public investment was long overdue.

Polls suggest the Greens are in course to become the conservatives’ junior coalition partner following federal elections in September, when Merkel will stand down as chancellor. ($1 = 0.8243 euros) (Reporting by Michael Nienaber and Andreas Rinke; editing by John Stonestreet)