Germany's Grand Coalition is set to substantially increase its net borrowing in 2009 -- the first time since coming to office. The news comes as an industry poll predicts job losses of 215,000 in Germany next year.
The German government expects a drop in revenue
The German government plans to increase its new debt by 18.5 billion euros ($23.2 billion) in 2009 in light of the global financial crisis. Finance Minister Peer Steinbrueck (SPD) had originally budgeted for 10.5 billion euros of additional borrowing.
A central aim of the current government has been to achieve a balanced budget by 2011. Steinbrueck has already conceded this is unlikely.
The new budget plans were agreed by the German parliament's budget committee in the early hours of Thursday, Nov. 20, after 12 hours of discussions.
The changes reflect a drop in tax revenue and increased spending on welfare benefits, as well as the cost of the economic stimulus package and the loss of projected earnings from the privatization of Deutsche Bahn and the property firm TLG Immobilien, which were postponed because of market turmoil.
Auto industry to be hit hard
Opel is not the only automaker that's hit
As Germany slides into recession, an industry study released by Germany's Bild newspaper on Friday predicts the global financial crisis could mean the loss of up to 215,000 jobs in Germany next year. The paper arrived at their projection after canvassing unions, industry associations and economics experts from 15 different sectors.
The car industry is likely to be the hardest hit, according to the poll. Here, experts forecast job losses in the automobile sector of between 50,000 and 100,000. Forty thousand jobs could also go in the transport industry. The situation also looks grim in the construction trade, banking and insurance sector and retail industry.
By contrast, Germany's engineering sector expects employment to remain stable, as does the health industry.
Growth prediction trimmed back
Germany's council of five economic advisers pegged back its growth prediction for next year from zero growth to a shrinkage of 0.2 percent on Thursday.
The president of the ZEW Centre for European Economic Research, Wolfgang Franz, said the adjustment reflected the effects of the world financial crisis.
He and his four colleagues also reduced their growth forecast for the current year to 1.5 percent, down from their earlier forecast of 1.7 percent. Franz said this reflected third-quarter data showing Germany has officially slipped into recession after two quarters of negative growth.