Germany Disappoints: Announces Massive Climate Plan (That Is Fiscally Neutral)

Update (0920ET): Merkel confirms that Germany will stick to zero deficit spending...

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Despite all the hope of fiscal largesse from the market and pressure from ECB's Draghi, Germany has unveiled a "3-digit-billion" euro plan to address climate change, but it will have "neutral impact" on government finances.

Chancellor Angela Merkel's government reached a deal Friday on a broad climate plan for Germany, a coalition source said, as tens of thousands of protesters rallied demanding more environmental protection.

After marathon overnight talks dragging more than 18 hours, the coalition reached "an agreement with many measures and an annual monitoring mechanism" on meeting climate targets, said a government source.

The plan, which covers a slew of measures from tackling emissions in the energy and industrial sectors, to incentives for zero-emission electric vehicles or public transport, was due to be unveiled at a press conference later Friday.

The package is worth about 50 billion euros ($55 billion), according to local media reports. That's about the same amount Scholz has said would be available for a stimulus package to boost Europe's biggest economy in the event of a severe recession.

But, as Germany's DPA reports, Germany won’t take on additional debt to fund the package agreed between governing parties, citing unidentified people close to the coalition.

The package to save the world will be paid for by increased taxes - Consumer prices of gasoline and diesel to rise EU0.03 per liter from 2021, and by EU0.09 to EU0.15 per liter by 2026; and funds from a national carbon trading scheme. Additionally, Germany stated that it may issue green bonds in the future.

The bottom line is simple - get back to work Mrs. Lagarde.