Major budget cuts coming

AFP - [email protected] • 4 Oct, 2009 Updated Sun 4 Oct 2009 09:23 CEST
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The incoming centre-right German government will be obliged to cut public deficits by €40 billion ($56 billion) between 2011 and 2013, according to a working paper leaked to the press.

According to the next issues of the weeklies Der Spiegel and Focus, Chancellor Angela Merkel told leaders of her Christian Democratic bloc that the cuts must be of the order of €7.2 billion in 2011, €12.8 billion in 2012 and €20.6 billion 2013.

The measures have been made necessary by new budget legislation just passed by the outgoing coalition government of the CDU and the Social Democrats, which will oblige Germany to devote more tax revenue to reducing deficits in periods of growth.

The new rules mean the future budget must provide for increased revenues or deep cuts in spending when the economy improves.

The requirements threaten to complicate negotiations on a new coalition between the CDU and the business-friendly Free Democrats (FDP), who are demanding tax cuts of €25 billion.

Merkel's party for its part will go no further than €15 billion.

Leaders of the CDU and FDP meet Monday to draw up a government programme for the next four years.

However the working paper quoted by the magazines said the budget deficit this year should "only" be €40 billion, as against €47 billion forecast earlier.

This should be the equivalent of 3.7 percent of gross domestic product, only marginally above the limit laid down by the European Union.



AFP 2009/10/04 09:23

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