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Germany

Experts: German Stimulus Package Will Breach EU Deficit Rules

A supplementary budget by the German government to stimulate the economy is expected to breach a cap on public spending imposed by the European Union, some officials in Berlin said Sunday.

The German Chancellory against a sky with dark clouds

The EU might not like Monday's decisions by the German ruling coalition

Speaking a day before the three parties in Chancellor Angela Merkel's coalition meet to discuss injecting 50 billion euros ($68 billion) into the economy, a finance ministry spokesman said whatever was decided would be promptly put into effect.

The federal government is expected to spend somewhat less than 50 billion euros, but argues that grants and tax cuts could seed that amount in additional spending during this year and next.

While the ministry offered no comment on the effects of the supplementary budget, research staff of the Christian Democratic caucus in parliament reportedly suggested the bill this year might be 30 billion euros.

They said this would lift Germany's net public borrowing by the federal, state and local governments and social-welfare funds to 3.5 percent of German gross domestic product (GDP) and to 4.5 percent next year.

The figures were to be reported Monday by the business newspaper Handelsblatt, but party sources confirmed Sunday to the DPA news agency they had seen the numbers.

Falling GDP doesn't help

Part of the effect is expected to come from a simultaneous decline in German GDP.

The Maastricht rules agreed when the euro was introduced require euro nations to limit net borrowing to no more than 3 percent of GDP. The strict rules are meant to underpin the common currency and keep it stable.

The newsmagazine Der Spiegel offered a smaller figure for the supplementary budget: 20 billion euros.

Merkel declined Saturday to predict how much new borrowing would be needed.

Asked if Germany would meet the Maastricht criteria in the next few years, she said, "It would be irresponsible to set absolute figures."

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