The costs of a new financial stimulus plan and a slumping economy will cause Germany’s budget deficit to hit a record in 2009, a top lawmaker in Chancellor Angela Merkel’s party said on Tuesday.
Christian Democrat parliamentary leader Volker Kauder said the country was looking at an estimated €50-billion deficit for the year — €10-billion higher than the previous record set in 1998.
Senior members of Merkel’s coalition said late on Monday they had agreed upon a multibillion-euro economic stimulus package to help the country out of recession.
The new package will run through 2010 and total about €50-billion ($67-billion). Coming on top of an earlier plan worth €23-billion passed last month — criticised at home and abroad as too cautious — the new measures amount to one of the largest stimulus plans so far in Europe.
The package includes €17-billion to €18-billion in infrastructure spending, as well as tax cuts and breaks, cuts to state health care contributions and bonuses for families with children — all of which will eat into the budget.
Despite pushing the country to a record deficit, Kauder told reporters ”it’s fully clear these measures are necessary”.
The new borrowing seems certain to push Germany over EU rules that limit yearly budget deficits to less than 3% of GDP. However, that will depend on how soon the economy bounces back from the current recession, experts say. – Sapa-AP