As anticipated - Germany To Stick To Austerity Plan Despite Lower Deficit
By Andrea Thomas
Of DOW JONES NEWSWIRES
BERLIN (Dow Jones)--The German government will go ahead with planned austerity measures, despite there being less need for budget consolidation in the coming years thanks to an improved labor market and extra revenue, a finance ministry spokesman said Friday.
"The finance minister has said he won't use any possible additional leeway to ease consolidation efforts," finance ministry spokesman Martin Kreienbaum told reporters. "The structural deficit for 2010 will probably be lower than the 2010 budget plan assumes."
The comments were made ahead of a two-day closed-door cabinet meeting on the government's budget plans for the coming years, including key points of the 2011 budget.
Germany's constitution requires the government to reduce its structural deficit, which excludes cyclical factors, to 0.35% of gross domestic product by 2016, compared with around 3% at present. The government had said in the past it has to cut spending or raise extra revenue by around EUR10 billion annually from 2011 to 2016 to meet this requirement.
Finance Minister Wolfgang Schaeuble said Wednesday that the government's net new borrowing in 2010 will be clearly below the EUR80.2 billion penciled into the 2010 budget, while the Deutsche Bundesbank--Germany' central bank--recently said the government's budget deficit would be clearly below EUR70 billion this year.
Chancellor Angela Merkel, Schaeuble and Vice Chancellor Guido Westerwelle will brief the press ahead of the cabinet meeting Sunday around 1200 GMT.
Various options are expected to be discussed, including cuts in social welfare and long-term unemployment benefits as well as raising extra revenue for the costly public healthcare sector.
German media has also reported that the cabinet will discuss an increase in reduced value-added tax rates for some products, a higher tobacco tax and a levy on plane tickets. In addition, it has been reported that the finance ministry has proposed an increase in the solidarity tax--proceeds of which are used to rebuild the former East Germany--to 8% from 5.5% of gross income.
A tax on fuel elements for utilities in exchange for the planned extension of Germany's 17 nuclear power plants' lifespan could also be discussed, they said.
-By Andrea Thomas, Dow Jones Newswires; +49 30 2888 4126; andrea.thomas@dowjones.com |
