Germany agrees budget cuts targeting the deficit
Germany’s government yesterday agreed on a four-year, €80bn (£66.6bn) austerity plan, committing the country to slashing its bloated budget deficit and shoring up chancellor Angela Merkel’s centre-right coalition.
The seal of approval from the cabinet on the package is welcome news for Merkel, who had been under pressure to tone down measures criticised at home as unfair and abroad as a threat to the global recovery.
Finance minister Wolfgang Schaeuble said the plans put Germany on track to cut its budget deficit to below three per cent of gross domestic product by 2013 and cap new borrowing.
“Those who doubted the seriousness of this plan have to take these figures into account,” he told a news conference.
The budget, going before parliament by the end of November, will cut spending to €307.4bn next year, a 3.8 per cent decrease from 2010, and reduce the deficit to €60bn.
The savings measures mark the latest chapter in Germany’s drive to consolidate its public finances. It has drawn criticism from some of its Euro zone partners, who say it is too early to withdraw emergency stimulus.
Economy minister Rainer Bruederle denied the austerity plan would endanger the recovery in Europe’s largest economy, seen as crucial to the region’s economic prospects.
“There is no risk of choking off the recovery,” Bruederle told reporters after the cabinet meeting, adding that solid state finances encouraged stable and sustainable growth.
Germany ended its deepest post-war recession a year ago and recent data suggest the upswing is gathering pace, despite an unexpected dip in industrial orders in May.
The government has been mulling ways to pay for the budget cuts, for example by raising extra revenue and scrapping some VAT discounts.