German cabinet approves 2008 budget plan

4th July 2007, Comments 0 comments

4 July 2007, BERLIN (AP) _ Germany's Cabinet approved a draft 2008 budget on Wednesday that foresees a cut in new borrowing even as spending increases slightly _ underlining the government's aim to balance its books by 2011.

4 July 2007

BERLIN (AP) _ Germany's Cabinet approved a draft 2008 budget on Wednesday that foresees a cut in new borrowing even as spending increases slightly _ underlining the government's aim to balance its books by 2011.

Next year's plan calls for federal spending of 283.2 billion euros (US$385.6 billion) _ a 4.7 percent increase from the 270.5 billion euros (US$368.3 billion) planned this year. Net new borrowing is set at 12.9 billion euros (US$17.6 billion), compared with the 19.6 billion euros (US$26.7 billion) penciled in for 2007.

The government has been able to scale back its borrowing plans as a sustained recovery in Germany's economy _ Europe's biggest _ has produced healthier tax income.

"We are presenting a financial plan under which we will achieve a balanced budget for the first time in 40 years in the year 2011 at the latest," Finance Minister Peer Steinbrueck said after the Cabinet decision. "We now have the historic chance to get our house financially in order while the weather is good."

Berlin now foresees borrowing a total of €29.4 billion (US$40 billion) through 2010 and reducing new loans to zero the following year. That compares with a previous prediction of 83.5 billion euros (US$113.7 billion).

The Finance Ministry forecast a steady rise in tax revenue over the next few years. It expects to bring in 237.1 billion euros (US$322.8 billion) next year, up from 220.5 billion euros (US$300.2 billion) this year.

Steinbrueck defended plans to increase spending, saying Chancellor Angela Merkel's left-right government believes it should "not just consolidate, which is important and right and in which we increasingly are succeeding, but also to send impulses for growth and employment."

"It makes no sense to save ourselves into a coma," he said.

The biggest single budget by far, that of the Labor Ministry, will be barely changed next year at just over 124.4 billion euros (US$169.4 billion).

The draft foresees a 3.2 percent increase for the Defense Ministry, which will get some 29.3 billion euros (US$39.9 billion); and an 18 percent hike in the budget of the Families Ministry, which will get nearly 6.2 billion euros (US$8.4 billion).

The Development Ministry, which is responsible for international aid, will see its budget rise by 14.9 percent to nearly 5.2 billion euros (US$7.1 billion).

Germany already had forecast a deficit of about 0.5 percent this year and the same next year after bringing it below a European Union-imposed limit of 3 percent in 2006 following several years of overruns.

AP

Subject German news

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