October 2, 2019 / 8:17 AM / 14 days ago

German institutes urge Berlin to ditch 'black zero' budget policy

BERLIN (Reuters) - Germany’s economic institutes on Wednesday called on Berlin to ditch its ‘black zero’ budget policy of not contracting new debt if the growth outlook for Europe’s largest economy should deteriorate further.

“Overall, ... there is currently no reason for additional fiscal action,” the institutes said in their joint report, but added that the government should use its fiscal leeway if the economic downturn turns out to be more significant.

In such a scenario, the fiscal leeway of the government should not be restricted by the self-imposed goal of keeping a balanced budget, the institutes said.

Under the German debt brake rule, the federal government can take on new debt of up to 0.35% of economic output.

Reporting by Michael Nienaber,; Editing by Tassilo Hummel

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