Germany to lift spending, keep balanced budget up to 2021

BERLIN, March 11, (RTRS): Germany plans to boost government spending by a total of more than 38 billion euros ($40 billion) 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 1 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 355.6 billion euros in 2021, under the plan, from 317.4 billion euros last year — an increase of 38.2 billion euros. 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 35.13 billion euros in 2016, will rise to 38.45 billion euros in 2018, under the plans — a figure that is projected to represent 1.23 percent 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 2 percent of economic output on defence.

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

Next year, the government plans to increase overall spending by 1.9 percent to 335.5 billion euros, 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 60 percent 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. But the country is heading towards a federal election in September and the budget plan may be subject to revisions if a new coalition takes power.

The federal government has kept balanced budgets since 2014 and it decided in 2015 that all federal surpluses would be put aside for integrating refugees and addressing the root causes of migration.

Also:

BERLIN: As Berlin hosts the world’s largest annual travel fair, the ITB, much talk at the show this year has been over the city’s long-delayed new airport and a strike that paralysed air travel on Friday.

The German capital is currently served by two cold war airports — Tegel in the northwest and Schoenefeld to the southeast.

Berlin Brandenburg airport was due to open in 2011, but several opening dates have been postponed as the project faced red tape and technical problems with smoke ventilation systems, cabling and doors.

This week chief executive Karsten Muehlenfeld, who in January scrapped plans to open the airport at the end of 2017, was replaced by Engelbert Luetke Daldrup after a row over the firing of the project’s construction head. No new opening date has been set. “It’s such an embarrassment, they produce wonderful cars, their engineering is world class, the economy is strong, but they’ve got an airport they can’t seem to build,” said Tim Clark, the president of Emirates airline.

The city of Berlin hopes the new airport will bring more visitors from overseas, both for business and tourism.

“It would mean that the people who would like to visit us could come, for instance from China. People want to go to the nation’s capital,” Burkhard Kieker, head of tourism promotion group visit Berlin said.

But Ryanair chief marketing officer Kenny Jacobs said it would be too small when it opens.

Berlin’s two airports served 33 million passengers last year while the new international hub, due to replace both Tegel and Schoenefeld, is set for initial capacity of 27 million.

“London has six airports and capacity for 130 million, Paris has four airports and 110 million capacity and Berlin is saying we’ll be ok with capacity of 27 million and one airport?” asked Jacobs.

Travel to Germany has also been hit by a 25-hour strike by ground staff at Berlin’s two airports, which led to the cancellation of nearly 700 flights on Friday, affecting tens of thousands of passengers.

That left delegates at ITB, which sees more than 10,000 companies from 184 countries touting for business, scrambling to rebook their plane tickets, change their travel dates or switch to buses and trains to return home.