Germany to raise about EUR350 bln in new debt to finance stimulus measures amid coronavirus crisis – Reuters

Dhwani Mehta FXStreet

Citing unnamed government sources on Saturday, Reuters reported that the German Finance Minister Olaf Scholz reportedly said the debt ceiling will be raised to include a supplementary government budget of EUR156 billion (bln).

The sources said that the government's stimulus package will include EUR100 bln for economic stability fund, EUR 100 bln in credit to the development bank, KFW, for loans to businesses.

Further, there will be EUR400bn in loan guarantees, totaling up the package toEUR750 bln.

With the new stimulus package, Germany will defy its fiscal rulebook, as the government seeks to support and stabilize the market in fighting the coronavirus pandemic.

EUR/USD reaction

The shared currency could be offered some reprieve by the fiscal stimulus measures likely to be announced, reviving the recovery in EUR/USD from the lowest levels since April 2017 reached on Friday at 1.0638.

Meanwhile, the greenback could meet further supply across its main competitors, as the Fed continues with its operation to ensure enough liquidity in the system. The funding stress in the market sent the US dollar index to over three-year highs of 102.99 last week.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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