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Budgetary Surplus

DW staff (tt)August 23, 2007

Germany has recorded a real budget surplus in the first half of the year for the first time since reunification, officials announced Thursday. A leading politician cautioned that the country's still struggling.

A girl playing on the edge of a water fountain
Geman public accounts showed a budget overflow in the first half of this yearImage: AP

"The budget had always recorded a deficit since the German reunification in 1989 -- except in the second half of 2000 due to the high revenues from the UMTS license auction," the Federal Statistics Office said in a statement, referring to the exceptional income generated by the licensing of third-generation mobile telephony.

The finance ministry said it was happy with the state of the public books, but ruled out any tax cuts.

"It is very satisfactory," a spokesman for the ministry told news agency AFP. "But we must continue to balance the budget, so there is no question of cutting taxes."

Not yet out of the woods

Volker Kauder
It's not over till it's over, says Volker KauderImage: dpa

Volker Kauder, the leader of Chancellor Angela Merkel's Christian Democratic Union in parliament, praised the positive results. But he also stressed that the government still had a lot on its plate when it came to budgetary consolidation.

"We're still not out of the woods," Kauder said in an interview for the public broadcaster's ARD morning news program. "We still have our new net debt and we still have to pay 40 billion euros ($53.9 billion) in interest every year."

Kauder said that the government would make a strong effort to eliminate new borrowing by 2011-2012, which would be in the next legislative period.

"We have to keep saving, and we won't be able to fulfill many wishes that are directed towards us," he said.

Strong revenues

A hand stamping tax documents
Despite the budgetary surplus, there will be no tax cutsImage: picture-alliance/dpa

According to provisional data from the Federal Statistical Office, the budget was in surplus by 1.2 billion euros in the first half of 2007, compared with a deficit in the same period of last year of 23 billion euros.

While revenues rose strongly on an increased tax take, expenditure increased only moderately by 0.7 percent.

Over the period 2002-05, Germany failed to meet the European Union's Maastricht requirement of keeping deficits below 3 percent of gross domestic product (GDP). In the first half of 2007, Germany's surplus amounted to 0.1 of the country's GDP.