Germany to lift spending by €38bn by 2021

Michael Nienaber GERMANY plans to boost government spending by a total of more than €38bn by 2021 without straying from its goal of keeping a balanced budget, according to a draft finance ministry document seen by Reuters on Friday.

The arrival of more than a million migrants to the country over the past two years has raised questions over whether Berlin can stick to its cherished “schwarze Null”, or balanced budget, despite the costs of accommodating and integrating the refugees.

Spending will rise to €355.6bn in 2021, under the plan, from €317.4bn last year — an increase of €38.2bn. But with tax revenues expected to keep going up and borrowing costs to remain low, the finance ministry document does not foresee the need for net new borrowing.

Defence spending, which was €35.13bn in 2016, will rise to €38.45bn in 2018, under the plans — a figure that is projected to represent 1.23pc of economic output.

US President Donald Trump has called on Germany and other Nato members to accelerate efforts to meet the alliance’s target of spending 2pc of economic output on defence.

Berlin plans to increase its defence spending to €42.297bn in 2021, according to the draft document, which is still likely to be short of the 2pc mark.

Next year, the government plans to increase overall spending by 1.9pc to €335.5bn, with the extra money mainly going to refugee integration, development aid, defence and domestic security. The document also shows the government wants to reduce its overall debt to less than 60pc of gross domestic product in 2020 for the first time since 2002, meeting a criterion set out in the EU’s Stability and Growth Pact.

The German cabinet is expected to approve the draft plans — the 2018 budget and financing plan up to 2021 — in June. (Reuters)