Germany to boost spending, after balancing its budget

By on 13/03/2015

After balancing its budget for the first time in almost half a century, Germany’s government plans to increase spending on infrastructure and foreign aid over the next five years, senior government sources told Reuters news agency today.

Berlin achieved the so-called “schwarze null” (black zero) – a federal budget in the black, or fully balanced – a year early, in 2014, a boon for Angela Merkel’s coalition government that has preached budget discipline to its euro zone partners.

But Europe’s biggest economy has come under international pressure to help global growth by loosening its purse strings and raising public spending to fix creaky infrastructure while it can benefit from rock-bottom interest rates.

As part of a supplementary 2015 budget to be debated by the cabinet on Wednesday, the government plans to increase spending by €4.2bn (£2.9bn) to €302.6bn this year, the sources said – but without straying from the balanced budget.

This includes a one-off payment of €3.5bn into a new investment fund for financially weak local communities.

For 2016, the government expects to increase spending by 3.3% to €312.5bn, which should grow to €334.0bn by 2019. Tax revenues are expected to rise over the same period, so the government does not foresee the need to issue any new debt.

Alongside investment in infrastructure and internet expansion, the government plans to raise significantly its spending on foreign aid and has budgeted €8.3bn for this in the period 2016-2019.

After the Islamist attack on French satirical newspaper Charlie Hebdo in January, the government also plans to give more money to security agencies and top up funds to modernise the army, the sources said, without specifying the amount.

About Winnie Agbonlahor

Winnie is news editor of Global Government Forum. She previously reported for Civil Service World - the trade magazine for senior UK government officials. Originally from Germany, Winnie first came to the UK in 2006 to study a BA in Journalism & Russian at the University of Sheffield. She is bilingual in English and German, and, after spending an academic year abroad in Russia and reporting for the Moscow Times, Winnie also speaks Russian fluently.

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