MNI INTERVIEW: Germany to Reduce Virus Debt Over 20 Years

By Luke Heighton

     FRANKFURT(MNI) - Germany will take many years to return its public debt to

pre-pandemic levels, a senior government official told MNI, although he expected

the country's economy to bounce back from the effects of coronavirus in the

second half of 2020.

     "I do believe that we will see a recovery in the third quarter, and even

more in the fourth quarter," Philipp Steinberg, Director General Economic Policy

at the Federal Ministry for the Economy and Energy, said in an interview. "But

of course any further development depends on the development of the number of

infections."

     Germany is prepared to increase its debt-to-GDP ratio to 75% from its

current level just below 60% as it responds to the virus, Steinberg said, noting

that this demonstrated fiscal and political flexibility.

     --20 YEARS TO REDUCE DEBT

     "We will need to reduce the debt incurred" he continued, "but it can be

done with a very long perspective - the Treasury has foreseen a 20-year period

to write it off (sic)."

     "Because we were pursuing a very sustainable policy strategy, now we can

act forcefully in the political area and on the markets," Steinberg said.

     "There was never an ideology in Germany that we would never do deficit

spending or incur debt if necessary. The crisis proves that we are very flexible

indeed if the need arises."

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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