Germany set for balanced budget in 2012

Germany is on course to present a balanced budget for 2012, the federal finance ministry in Berlin announced yesterday.

The total German budget – pooling federal, state and municipal spending – will not require any borrowing thanks to a rise in tax revenue and a drop in social welfare spending.

The last forecast from summer predicted borrowing equivalent to 0.5 per cent of GDP.

Despite increased costs this year – for the ESM bailout fund and a capital boost for the European Investment Bank – the debt to GDP ratio is expected to drop this year to 81.5 per cent instead of the forecast 83.5 per cent. This is still above the allowed Maastricht ceiling of 60 per cent, but Germany has vowed to drive down this ratio to 73 per cent by 2016.

The total public budget is expected to move into a modest surplus of 0.5 per cent next year and in 2014 before returning to zero the following two years, according to finance ministry projections.

Such budget forecasts put Germany in a position to meet the fiscal and growth pact’s “golden rule”, which limits EU member state “structural” deficits to a maximum of 0.5 per cent of GDP.