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Germany

Germany passes 2011 budget with less-than-expected new debt

The German government has officially agreed on the 2011 budget, which will contain around nine billion euros less new debt than the proposal passed by the lower house of parliament, the Bundestag, in July.

A finger points at a counting board

This time the math brings good news to Germans

The German government has officially passed its budget for 2011, which foresees the government borrowing significantly less than previously expected.

According to the corrected proposal - passed by the parliament's budgetary commission early on Friday - the government will take out new borrowings totaling around 48.4 billion euros ($66 billion) in next year, as opposed to the 57.5 billion euros foreseen in Finance Minister Wolfgang Schaeuble's original proposal.

The budgetary revisions are a result of higher-than-expected prognoses of German economic activity. In 2010, the German economy is set to grow some three-and-a-half percent; in 2011, growth of at least two percent has been forecast.

A healthier economy will result in both larger tax revenues and lower welfare expenditures, as many more Germans will be employed than previously predicted.

Notwithstanding the revisions to the 2011 budget, the German government stands to take on more new debt next year than in any fiscal year in its history.

The 2011 budget, the first of Chancellor Merkel's center-right government, contains the first cuts of the unprecedented austerity package earlier this year, which looks to reign in 80 billion euros in public debt over the next four years.

Author: Gabriel Borrud (AFP, dpa)
Editor: Rob Turner

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