German austerity budget is 'growth friendly': minister

9th September 2010, Comments 0 comments

Germany's austerity budget is compatible with growth, Finance Minister Wolfgang Schaeuble said Thursday as the OECD suggested governments could ease up on the debt brake to aid recovery.

A programme aimed at reducing the German deficit is "growth-friendly" and Berlin does not intend to reverse course, Schaeuble told a banking forum in the country's financial capital.

He spoke after the Organisation for Economic Cooperation and Development (OECD) said in Paris that a global economic recovery is slowing and suggested that if public finances permitted, planned budget cuts could be delayed.

"We are on the right path and we do not intend to quit," Schaeuble said.

Germany's public debt should fall below 60 billion euros (76 billion dollars) this year, a level that is nonetheless still very high, he added.

Officials in Berlin aim to cut the country's public deficit to below three percent of gross domestic product (GDP) by 2012, thus reaching the upper limit allowed in principle for European Union members.

Chancellor Angela Merkel's government has drawn up an austerity budget that should save around 80 billion euros by 2014.

Like Economy Minister Rainer Bruederle, Schaeuble also forecast that the number of unemployed workers would fall below three million this year.

He appeared to accept private growth forecasts for 2010 of 3.0 percent, but added: "If we have growth of between 1.5 and 2.0 percent next year that will be good."

There were still "plenty of risks" to the forecast, Schaeuble warned.

Volatility in eurozone financial markets was a concern meanwhile, the finance minister acknowledged, but the dollar's health was an even bigger worry that that of the euro in the coming five years, he said.

© 2010 AFP

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