German budget deficit smaller than thought: draft budget

5th July 2010, Comments 0 comments

German budget overspending is on course to be sharply lower than feared because of unexpectedly robust recovery from the economic downturn, a draft budget obtained by AFP on Monday suggests.

Germany's federal budget deficit will amount to about 65 billion euros (81 billion dollars) this year compared to a previous estimate of 80 billion euros.

Germany has the biggest economy in the eurozone which overall is clouded by concerns about government debt.

Next year, the deficit will be 57.5 billion euros, nearly 20 billion less than feared, according to figures in the draft budget.

"Overall, this is a timely chink of light with respect to fiscal woes," said Padhraic Garvey from ING bank.

In 2011, the deficit will be smaller than expected owing to lower overall unemployment benefits than had been forecast. In addition, a lower debt pile will reduce interest payments.

The German government has said it will try to cut at least 80 billion euros from the budget by 2014, including more than 11 billion euros next year.

It has also passed a "debt brake" law that binds Berlin to a balanced budget again by 2016 at the latest.

After its worst economic slump in more than 60 years last year, with output shrinking by 4.9 percent, Germany's economic fortunes have turned around swiftly, driven primarily by exports.

Berlin is counting on growth of 1.4 percent this year, a forecast that is too pessimistic according to many experts.

© 2010 AFP

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