Schäuble balances the German books

German finance minister Wolfgang Schäuble demonstrated the flip side of austerity yesterday, presenting the country’s first balanced budget since 1969. After 45 years of borrowing – and four years of budget consolidation – Mr Schäuble said yesterday German net borrowing would drop to €6.5 billion this year and zero in 2015.

“We are keeping our word that we wanted to get by without new borrowing . . . and from 2015 we will get by without new debt,” said a visibly proud Mr Schäuble yesterday.

His five-year financial plan to 2018 foresees Germany's debt to gross domestic product (GDP) ratio dropping to 75 per cent this year and to below 70 per cent in 2017.

Wriggle room
Berlin had planned to use the fiscal wriggle room to start paying down its federal debt of €1.27 trillion, or €15,760 per capita.

Though servicing this debt costs €29 billion annually, Berlin’s grand coalition government has postponed paying down the debt until after 2017 plans to finance a €23 billion spending programme on infrastructure and education, as promised in September’s federal election.

Despite growing tax revenues, Mr Schäuble said he planned to keep annual spending near €300 billion for the rest of the grand coalition term.

“If you keep spending steady with growing tax income, that’s how you get to zero borrowing,” he said. “This is a solid budget without trickery.”

Opposition parties begged to differ, accusing Mr Schäuble of not being ambitious enough and of balancing the budget with one-off measures. His ministerial predecessors nonetheless congratulated him on the news yesterday.