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Germany

Improved economic outlook means less debt for Germany

Thanks to a rosier economic outlook, the German finance minister Wolfgang Schaueble can expect a lower deficit for 2010 and will need to borrow perhaps as much as 20 billion euros less to finance the budget.

Symbolic image of euro banknotes disappearing down a black hole

Less new debt will not stop spending cuts in Germany

According to reports in two German newspapers on Tuesday, Berlin's center-right coalition government can look forward to a lower borrowing forecast in 2010 and taking on less debt to finance the federal budget.

The Sueddeutsche Zeitung newspaper and mass circulation daily, Bild, have both reported that the better-than-expected outlook for the German economy this year means the government can sharply reduce its net borrowing costs for the current budget.

Finance Minister Wolfgang Schaeuble, the papers reported, can expect to cut borrowing by some 20 billion euros ($25 billion). The budget deficit for 2010 is now expected to be around 60 to 65 billion euros.

Spending cuts to come despite debt relief

Quoting government budget officials, the two papers said that several reasons have contributed to the improvement: Higher corporate tax revenues due to a sharp rise in exports, lower labor market costs, plus added income earned from the recent auction of fourth generation mobile phone network licenses to telecommunications companies.

Despite the rosier outlook, Otto Fricke, a budget expert for the business-friendly Free Democrats, urged the government to stick to its plans to cut spending.

"Even if just 60 billion euros is possible, that is still record new debt, and therefore, there is no other course than to cut spending," Fricke told the Bild Zeitung.

Germany's plan to reduce expenditures has met with criticism from US President Barack Obama, who has urged Berlin and other major European economies not to choke off growth by cutting back on government spending.

Author: Gregg Benzow (dpa/AFP)
Editor: Rob Turner

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