German government endorses balanced budget policy | Business | Economy and finance news from a German perspective | DW | 06.07.2016

Visit the new DW website

Take a look at the beta version of We're not done yet! Your opinion can help us make it better.

  1. Inhalt
  2. Navigation
  3. Weitere Inhalte
  4. Metanavigation
  5. Suche
  6. Choose from 30 Languages


German government endorses balanced budget policy

The German cabinet has thrown its weight behind Finance Minister Wolfgang Schäuble's draft budget for next year and his financing plans up to 2020. The main message is no fresh borrowing will be needed.

German cabinet ministers on Wednesday agreed to stick to plans for a balanced budget over the next four years. The government thus backed a Finance Ministry draft budget for 2017 and financing plans up to 2020.

The 2017 plan sees overall spending rise to 328.7 billion euros ($363.5 billion), marking a 3.7-percent increase year-on-year. Spending is to gradually increase to almost 350 billion euros annually by 2020.

But increased state spending does not mean Berlin is willing to take on new debt in the next four years.

Finance Minister Wolfgang Schäuble made it abundantly clear that sticking to a balanced budget was vital and would "send a message of reliability and continuity" after Britain's decision to leave the European Union.

Cost of migrants penciled in

The German government is confident it can raise spending without incurring net debt thanks to growing tax revenues as a result of record-high employment and ultra-low debt refinancing costs. Berlin thus has no interest in the European Central Bank changing its accommodative monetary policy any time soon.

Berlin expects to reduce its total public debt to less than 60 percent of gross domestic product in 2020 for the first time since 2002. If successful, it would thus meet a criterion set out in the EU's Stability and Growth Pact, which has been watered down since the start of the global financial crisis.

The draft budget yet to be supported by parliament addresses higher costs as a result of a massive migrant influx, with more than 1 million new arrivals last year triggering questions about the feasibility of more balanced budgets in the years to come.

But the government maintained the 77.5 billion euros earmarked for managing the flow of migrants would not endanger its rigid budgetary policies.

hg/jd (Reuters, dpa)