July 4 (Bloomberg) -- German Chancellor Angela Merkel’s government raised borrowing targets by more than 10 percent for the three years through 2015 after pledging contributions to a future European bailout fund, its multi-year budget plan shows.
Borrowing will amount to 24.9 billion euros ($36.2 billion) in 2013, more than the 22.3 billion euros the Cabinet endorsed on March 16, according to the 2013-2015 budget plan drafted by the Finance Ministry. The government aims to borrow 18.7 billion euros in 2014 and 14.7 billion euros in 2015, up from 15.3 billion euros and 13.3 billion euros, respectively.
The outline still leaves Germany on track to adhere to the so-called debt brake from 2016 that’s enshrined in the country’s constitution, a Finance Ministry official said on July 1 in Berlin, speaking on condition of anonymity.
Germany’s borrowing will drop from less than 30 billion euros this year to 27.2 billion euros in 2012, another Finance Ministry official said, also speaking on condition of anonymity. The 2012 total is less than the 31.5 billion euros in borrowing the Cabinet approved in March.
The euro area approved over the weekend its share of a 12 billion-euro aid payment for Greece and pledged to complete work in the coming weeks on a second rescue package for the cash- strapped nation to prevent a default. Europe is trying to draw a line under a debt crisis that Greece sparked more than a year ago and threatens the 17-nation monetary union.
Leaders are also setting up a permanent emergency aid program, the European Stability Mechanism, that will come into effect in mid-2013. Germany agreed to grant around 22 billion euros in capital over five years to the ESM.
Germany’s budget outline takes into account higher-than- expected tax revenue on the back of faster-than-forecast economic growth, as well as income losses from an early shutdown of nuclear reactors and the likelihood that proceeds from a planned financial-transaction tax won’t materialize.
Germany’s overall budget deficit, which includes the 16 states, cities and the social insurance system, will likely drop below 2 percent of gross domestic product this year from 3.3 percent of GDP in 2010, one of the officials said. European Union rules limit the shortfall to 3 percent of GDP.
There’s “very limited leeway” for measures such as tax reductions that would place lasting burdens on the budget, the Finance Ministry said in the draft. The budget plan aims to secure permanent adherence to the debt brake, which calls for a budget close to balance from 2016, it said.
--Editors: Fergal O’Brien, Andrew Reierson
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