Germany plans extra 10 bn euros in public investment by 2018

6th November 2014, Comments 0 comments

Germany plans an additional 10 billion euros ($12 billion) in public investment by 2018, its finance minister said Thursday, amid calls by some EU partners to do more to help the eurozone economy.

"I will propose to the cabinet that we allocate additional means for public investment of the order of 10 billion euros" by 2018, Wolfgang Schaeuble told reporters.

He said the move would represent a "fundamental contribution" to a plan announced by new European Commission president Jean-Claude Juncker for an extra 300 billion euros in investment for the coming years.

The veteran minister insisted that the additional outlay would not impact his country's plans for a balanced federal budget in 2015, the first since 1969.

"From 2015 we will also be able to raise spending to the levels that revenues increase," he said, presenting the latest expected tax receipts for the next few years which were slightly down on estimates in May.

"Therefore we have room for manoeuvre for additional investment.

"Asked where the additional expenditure would be focused, he spoke of research and education, as well as transport infrastructure, including the railways, and strengthening the finances of local authorities to support investment in construction.

Calls for Europe's top economy to do more to support growth have become louder recently amid the eurozone's stalling economic growth and due to concern in Germany about dilapidated infrastructure and maintaining competitiveness.

"The government saw the writing on the wall," Marcel Fratzscher, head of the DIW think tank in Berlin, said in a statement.

Sources, who spoke to AFP on condition of anonymity, said that Schaeuble was factoring in that the additional public funds would, in turn, generate 50 billion euros in private investment.

France recently called on its fellow EU heavyweight to help the eurozone's stagnant economy by loosening its purse strings and increasing investment to match the savings Paris is seeking to make in public spending.

Ministers from both countries promised at a summit in Berlin last month to do what was needed to boost investment in the single currency area.

Recent data has suggested that the German economy -- traditionally Europe's growth engine -- is stalling, threatening to pull the eurozone back into recession and put the brakes on the global recovery.

France, grappling with sky-high unemployment and a ballooning budget deficit, has been spearheading a campaign for Germany to soften its stance on fiscal austerity.

But Berlin remains adamant that the only way out of crisis is for eurozone countries to get their finances in order by sticking to agreed rules on the size of their deficits.

Chancellor Angela Merkel said as recently as last month that all EU members "must fully respect" the bloc's own budget rulebook.

She said only then could the Stability and Growth Pact "fulfil its purpose as the main anchor for stability and above all confidence in the eurozone".

© 2014 AFP

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