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Business

German Cabinet approves investment push

The German government has thrown its weight behind an investment initiative which means spending more in the years ahead without any fresh borrowing. But critics say the move is only of a symbolic nature.

The German Cabinet on Wednesday rallied behind an initiative to boost investment in crucial infrastructure projects in the years ahead, with more money to be made available through a 2015 supplementary budget and regular budgets beyond this year.

The government's draft plan - yet to be voted on by parliament - foresees

additional spending worth 4.2 billion euros ($4.45 billion)

in the current year, with the lion's share of 3.5 billion euros to go straight to cash-strapped communities across the nation.

But Finance Minister Wolfgang Schäuble insisted higher investments would not come at the cost of straying from the government's resolve to come up with a balanced budget at the end of the day, meaning no fresh borrowing would be penciled in.

Balancing act

Berlin said it expected 2.5 billion euros more in revised tax revenues for 2015 and also reckoned with an additional 700 million euros less in terms of servicing the state's huge debt load. On top of that, the federal bank's predicted earnings of some 3 billion euros would also completely go into the 2015 budget.

Higher investments are also planned medium-term for the 2016-2019 period, the government confirmed Wednesday.

Next year, spending is to increase by 3.2 percent to 312.5 billion euros, with expenditures to rise to 334 billion euros by 2019. Berlin said it planned to increase spending on development aid by 8.3 billion euros between 20116 and 2019.

The president of the Berlin-based German Institute for Economic Research (DIW), Marcel Fratzscher, argued much more should be invested in the years ahead to solve current infrastructure problems. Given the robust state of the German economy and the expected increase in state revenues, the state should spend much more and would still not have to fall back on fresh borrowing, Fratzscher insisted.

hg/ng (dpa, Reuters)

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