Germany’s finance minister wants more investment but no new debt
Greece needs ‘political stability’ during market turmoil: finmin
BERLIN, Oct 19, (Agencies): German Finance Minister Wolfgang Schaeuble told a newspaper on Sunday that he wanted to increase investment spending and improve competitiveness in Europe’s biggest economy but not at the expense of achieving a balanced budget next year.
A raft of gloomy economic data and expectations of a slowdown in German growth has contributed to jitters on world markets and Schaeuble is under pressure to spend on roads, railways, broadband networks and energy grids to help growth.
In an interview with the Welt am Sonntag, Schaeuble said criticism of the government on insufficient investment or lacking competitiveness was justified, but that Berlin was working on these at both the national and European levels.
“We must invest more and improve our competitiveness. We must get to work on this — quickly and in a concrete way,” Schaeuble told the paper.
“It will not all happen overnight. But we must work on certain things now, like the European digital union, the energy union or the sustainable maintaining of our infrastructure.” Hit by the effect of crises abroad, a weak euro zone and limp domestic demand, Germany has slashed its growth forecasts to 1.2 percent in 2014 from 1.8 percent and to 1.3 percent in 2015 from 2.0 percent.
But Schaeuble, who is known for his tough line on budget discipline, insisted Germany would not achieve growth on credit and that he still expected to reach a balanced budget next year for the first time since 1969.
“We must keep to what we have promised,” he said.
Budget
In the medium term, the defence budget might be increased due to demands from international partners and “geopolitical risks”, he said. Germany is arming Kurds in northern Iraq to help them fight Islamic State militants.
Schaeuble did not comment on the turmoil on world markets other than to say that talking up crisis scenarios did not help anyone and weaker economic developments reflected the changed situation in the world.
Meanwhile, Greece needs political stability to be able to negotiate the turmoil afflicting financial markets after deciding to exit its bailout plan early, its finance minister said on Sunday.
“We are at a delicate balancing point,” said Gikas Hardouvelis in an interview in weekly newspaper Realnews. “Current dynamics in the economic landscape require political stability.”
Prime Minister Antonis Samaras helped to fuel panic in global financial markets last week when he said Greece wants to end its international bailout programme by the end of December, a year ahead of schedule.
Analysts said forfeiting $16 billion (12.5 billion euros) of IMF aid is likely a move to curry favour ahead of a presidential vote next year, which right now polls say Samaras would lose to the radical left Syriza party.
Ending the International Monetary Fund’s aid programme would not be a “divorce, but a change of relationship” with the international institution, Hardouvelis said.
“The IMF will remain with us as an observer without the authority to meticulously control (Greece’s finances), as they have already done in other countries that have received loans,” the finance minister added.
He blamed “uncertainty” for the storm in financial markets last week, which saw a major sell-off of Greek shares and bonds, adding that “the market recovery will return when the reasons for the uncertainty disappear”.
Samaras on Friday sought to calm markets by saying Greece could keep open a precautionary credit line to “protect our country from possible market disruptions, especially at a time when the world economy is showing sights of slowing”.