German Parliament Approves Giant Fund to Tackle Energy Crisis

(Bloomberg) -- Germany’s lower house of parliament approved the ruling coalition’s plan to borrow as much as €200 billion ($195 billion) to tackle the energy crisis as well as the required suspension this year of a constitutional limit on net debt.

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Chancellor Olaf Scholz’s administration announced last month it would repurpose a fund used to help offset the impact of the coronavirus pandemic and bolster it with additional cash. Scholz said the new off-budget stabilization mechanism would allow measures to put a “large protective umbrella” over Europe’s biggest economy.

German 10-year yields surpassed 2.5% for the first time since 2011 after the vote, as traders girded for a potentially heavier supply of bonds to fund the plan.

Bank of America strategists said in a recent note that euro-region sovereign bond net issuance is set to break records in 2023, with investors having to digest more following the end of ECB bond-buying.

Some of Germany’s European Union counterparts have said Scholz’s plan aimed at shielding consumers and businesses from gas-price spikes threatens solidarity in the bloc, risks distorting energy markets and may disrupt cross-border flows of power and natural gas.

--With assistance from Libby Cherry.

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