The German cabinet today agreed new budgets for 2002 and 2003 which will cut spending in some areas and increase taxes in a bid to meet strict EU deficit rules, despite rising public anger over the weak economy.
Finance Minister Mr Hans Eichel's rejigged budget includes provisions for higher new borrowing and plans to change the tax system which will help Germany stay below the EU deficit ceiling of 3 per cent next year.
The package aims to help counter a massive fall in tax revenues following a slowdown in and a European Union censure over Germany's ever-rising budget deficit.
"If all is being implemented...then we will be below the three percent level next year, although it will not be an easy path," Mr Eichel told a news conference.
The 2003 budget foresees new borrowing of €18.9 billion and the government will also seek to borrow a further €13.5 billion in 2002, bringing federal new borrowing this year to €34.6 billion.
The figure does not include state and community level borrowing.
It also proposes a proposal to introduce a capital gains tax of 15 per cent. A first reading of the 2003 budget is expected to take place in early December, with parliamentary approval due in mid-March.