German finance minister plans ‘debt brake’ suspension

German Finance Minister Olaf Scholz of the Social Democratic Party (SPD) speaks during an interview in Berlin, Germany. (Reuters)
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Updated 27 February 2020

German finance minister plans ‘debt brake’ suspension

  • Scholz has long backed plans to lift a near-unbearable burden of repayments from 2,500 municipalities by shifting €40 billion ($43.5 billion) of their debts to Berlin

BERLIN: German Finance Minister Olaf Scholz plans to temporarily suspend a government “debt brake” to hand out tens of billions of euros to struggling municipalities, weekly Die Zeit reported on Wednesday.

With years of fat budget surpluses, Germany has long faced calls at home and abroad to loosen its purse strings, but the spread of the novel coronavirus and its likely impact on economic growth have given them new impetus.

“Scholz will present a plan in March,” Die Zeit wrote without citing its sources.

Scholz would need two-thirds majorities in both parliament’s directly elected lower house and the upper house representing the states to suspend the debt brake.

Anchored in the German constitution at the height of the financial crisis in 2009, the rule prevents government from running a deficit of more than 0.35 percent of the gross domestic product in normal times.

Finance Ministry spokeswoman Katja Novak declined to comment on “speculation,” telling AFP “the finance minister will present his proposals for dealing with old debt early this year.”

“At present various options are being discussed,” Novak added.

Scholz has long backed plans to lift a near-unbearable burden of repayments from 2,500 municipalities by shifting €40 billion ($43.5 billion) of their debts to Berlin.

He hopes it would lift a major hurdle to increasing infrastructure spending and eliminating financial and planning bottlenecks in municipalities responsible for projects like roads and schools.

Many of the towns affected are in deindustrializing “rust belt” zones, like Germany’s most populous state North Rhine-Westphalia.

After years of a no-new-debts policy known as the “black zero,” economists and EU partners are increasingly pressuring Berlin to upgrade aging infrastructure and stimulate its flagging economy with new spending.

A manufacturing slowdown in Europe’s top economy and the looming impact of the coronavirus have added urgency to such calls.

What is more, the European Central Bank’s monetary policy is already extremely loose, with negative interest rates and mass bond purchases under a “quantitative easing” scheme.

With little room to maneuver in Frankfurt, eurozone governments are on the hook to stimulate flagging economic growth, especially in case of a potential hefty shock stemming from an unforeseen event like the virus.


Tanker off UAE sought by US over Iran sanctions ‘hijacked’

Updated 16 July 2020

Tanker off UAE sought by US over Iran sanctions ‘hijacked’

  • The circumstances of the hijack are still unclear and the boat has been tracked to Iranian waters

DUBAI: An oil tanker sought by the US over allegedly circumventing sanctions on Iran was hijacked on July 5 off the coast of the UAE, a seafarers organization said Wednesday.

Satellite photos showed the vessel in Iranian waters on Tuesday and two of its sailors remained in the Iranian capital.

It wasn’t immediately clear what happened aboard the Dominica-flagged MT Gulf Sky, though its reported hijacking comes after months of tensions between Iran and the US

David Hammond, the CEO of the United Kingdom-based group Human Rights at Sea, said he took a witness statement from the captain of the MT Gulf Sky, confirming the ship had been hijacked.

Hammond said that 26 of the Indian sailors on board had made it back to India, while two remained in Tehran, without elaborating.

“We are delighted to hear that the crew are safe and well, which has been our fundamental concern from the outset,” Hammond told The Associated Press.

Hammond said that he had no other details about the vessel.

TankerTrackers.com, a website tracking the oil trade at sea, said it saw the vessel in satellite photos on Tuesday in Iranian waters off Hormuz Island. 

Hormuz Island, near the port city of Bandar Abbas, is some 190 kilometers (120 miles) north of Khorfakkan, a city on the eastern coast of the United Arab Emirates where the vessel had been for months.

The Emirati government, the US Embassy in Abu Dhabi and the US Navy’s Bahrain-based 5th Fleet did not respond to requests for comment. Iranian state media did not immediately report on the vessel and Iran’s mission to the United Nations did not immediately respond to a request for comment.

In May, the US Justice Department filed criminal charges against two Iranians, accusing them of trying to launder some $12 million to purchase the tanker, at that time named the MT Nautica, through a series of front companies. 

The vessel then took on Iranian oil from Kharg Island to sell abroad, the US government said.

Court documents allege the scheme involved the Quds Force of Iran’s paramilitary Revolutionary Guard, which is its elite expeditionary unit, as well as Iran’s national oil and tanker companies. The two men charged, one of whom also has an Iraqi passport, remain at large.

“Because a US bank froze the funds related to the sale of the vessel, the seller never received payment,” the Justice Department said. “As a result, the seller instituted a civil action in the UAE to recover the vessel.”

That civil action was believed to be still pending, raising questions of how the tanker sailed away from the Emirates after being seized by authorities there.

Data from the MT Gulf Sky’s Automatic Identification System tracker shows it had been turned off around 4:30 a.m. on July 5, according to ship-tracking website MarineTraffic.com. Ships are supposed to keep their AIS trackers on, but Iranian vessels routinely turn theirs off to mask their movements.

Meanwhile, the 28 Indian sailors on board the vessel found themselves stuck on board without pay for months, according to the International Labor Organization. It filed a report saying the vessel and its sailors had been abandoned by its owners since March off Khorfakkan. The ILO did not respond to a request for comment.

As tensions between Iran and the US heated up last year, tankers plying the waters of the Mideast became targets, particularly near the crucial Strait of Hormuz, the Arabian Gulf’s narrow mouth through which 20 percent of all oil passes. Suspected limpet mine attacks the US blamed on Iran targeted several tankers. Iran denied being involved, though it did seize several tankers.