By Bertrand Benoit in Berlin
Published: December 16 2009 19:00
Wave of protest: a rally outside the Reichstag building in Berlin on Wednesday. Wolfgang Schäuble’s warning on the deficit reflects a determination by the government to prepare the public for unpopular spending cuts.
Germany is heading for a severe fiscal crackdown once the economic crisis is over, warned Wolfgang Schäuble, finance minister, on Wednesday, adding that reining in a soaring budget deficit would “not be achieved with the conventional instruments”.
Mr Schäuble was speaking after presenting his draft 2010 budget to chancellor Angela Merkel’s cabinet. The draft foresees a federal deficit of €85.8bn ($124.8bn, £76.4bn), marginally less than foreseen by his predecessor but more than twice the previous record, which was reached in 1996. The government is also facing an estimated €14.5bn shortfall not included in the official budget from the previous administration’s economic stimuli and other measures.
Germany’s public finances have not been hit as hard as those of other European Union members by the economic crisis. The public sector deficit is this year set to remain just below the maximum of 3 per cent of gross domestic product allowed by EU fiscal rules and rise to about 6 per cent next year.
Yet the government faces an uphill struggle from 2011 because of fiscal rules enshrined in the constitution under the previous government that will force it to cut spending every year up to 2016.
Since the constitutional requirements focus on the structural deficit, Berlin cannot rely on extra revenues generated by the economic recovery to contribute the €10bn it will have to find every year.
Tackling the deficit will require “a huge effort”, Mr Schäuble said. The minister, a close ally of Ms Merkel, declined to comment on what unconventional fiscal measures he will take, but ruled out an increase in value added tax, in line with a pledge the chancellor made before the election. The warning underlines the government’s determination to prepare the public for unpopular spending cuts that could extend into Germany’s generous welfare system.
Talking to journalists on Wednesday, Mr Schäuble said the end of the economic crisis would not mark the end of sacrifices. Asked who would bear the cost of the fiscal clean-up, he answered: “All, everyone.”
Berlin, which is concerned about rising deficits among members of the eurozone – led by Greece – is also keen to broadcast the message about tougher fiscal discipline beyond Germany’s borders.
“When the crisis is over, our responsibility kicks in,” Mr Schäuble said.
In drafting his 2010 budget, the minister had insisted he would stick to the maximum deficit of €86bn foreseen by his predecessor despite the new government’s decision to launch a third stimulus package, including tax cuts, worth about €10bn. The budget also includes size-able subsidies to the state unemployment and health insurance systems.
It remained unclear on Wednesday whether the tax cut package would obtain the majority required in the Bundesrat, the upper house of parliament where the country’s 16 regional governments are represented, to become law.
Two regions in the government’s political camps have said they would not vote for the measure if they were not compensated for the tax revenue shortfall it would cause. Mr Schäuble reiterated on Wednesday that Berlin would not accept any compromise that would create a further burden on his draft budget.
“There will be no additional burden on the federal budget for 2010,” Mr Schäuble said. “We will not let ourselves be dragged into a game of poker here.”
Copyright The Financial Times Limited 2009
0 comments:
Publicar un comentario