German budget heading for record deficit

German budget heading for record deficit
Photo: DPA
Germany is set for a record deficit of €80.2 billion after Chancellor Angela Merkel’s centre-right coalition agreed on its first budget early on Friday morning.

The parliamentary budgetary committee debated the final plan for 14 hours, finally deciding on new debt for 2010 that was €5.6 billion less than that proposed by Finance Minister Wolfgang Schäuble.

The savings were possible thanks to improvements in economic growth expectations that allowed a spending reduction billion initially planned for funding social welfare benefits.

Total government spending is set to reach €319.5 billion, while the government expects to collect only €211.9 billion in tax revenue.

The debt is double that of the previous record set in 1996, but Schäuble said it was necessary following the country’s worst recession since World War II last year.

Meanwhile the opposition criticised the budget passed by Merkel’s conservative Christian Democrats and junior coalition partners the Free Democrats, saying that the lower debt projection was based on growth projections instead of real saving measures.

The country has been running on a provisional budget because of parliamentary elections in autumn 2009. Parliament will vote on the finalised budget in mid-March.

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