Politicians from Germany's coalition have agreed on how to plug a hole in their 2014 budget while keeping government borrowing at 6.5 billion euros. They said a targeted debt-free 2015 budget was "in touching distance."
Germany's parliamentary budget committee agreed in the early hours of Friday on finalized plans for spending and borrowing in 2014, plugging a hole that had materialized in the provisional budget. Owing to last September's general election, and the subsequent negotiations on forming Germany's grand coalition government, the formal budget process was delayed in parliament.
The overnight task for the German politicians was to shore up the provisional plans from Finance Minister Wolfgang Schäuble.
"We have proven ourselves worthy, thrifty economists," the Christian Democrats' Norbert Barthle said afterwards, praising the new debt intake of 6.5 billion euros ($8.88 billion) that was achieved "despite considerable extra stresses."
The largest additional "stress" was a recent ruling from a financial court in Hamburg, which awarded 2.3 billion euros in compensation to five nuclear power plant operators over a tax on fuel used at the plants. Provisional estimates on tax revenues for the year also appeared to be around 700 million euros too high, according to data from May, the latest available.
Favorable interest, but 1.3 trillion in the red
The coalition believed it could make back some of these costs simply by virtue of the low interest rates currently demanded for Berlin's debt, which totals 1.3 trillion euros, or just under half Germany's GDP for 2013 (2.73 trillion euros). Servicing existing debt in 2013 cost the German government almost exactly the same - around 33 billion euros - as funding its second-most expensive ministry, defense.
The European Central Bank on Thursday further reduced its already record-low base interest rate, briefly pushing Germany's DAX stock market above the 10,000-point mark for the first time in the index's history.
A final step to balance the books was delaying the planned investment of an additional 500 million euros in education this year, spending that should now begin as of 2015.
"The goal of presenting a 2015 budget with no new [government] borrowing is still in touching distance after this," Barthle said. The opposition were less impressed and said they expected the numbers to need later revision. The Greens' budget expert Sven-Christian Kindler said that during the overnight talks, the grand coalition of Christian and Social Democrats had "willfully presented a politicized estimation of tax revenues, in order to mask the massive [budget] gap."
msh/pfd (AFP, dpa, Reuters)