Bloomberg News

German Coalition Cuts 2013 Net Borrowing in Final Draft

November 09, 2012

German coalition lawmakers sealed a 2013 federal budget plan that shaves a third from a net new borrowing tally originally expected this year, a draft obtained by Bloomberg News shows.

In fine-tuning the 2013 plan before it becomes law, members of the parliament’s budget committee set net federal borrowing at 17.1 billion euros ($22 billion), about 1.7 billion euros less than in a previous draft and a third less than the 28 billion euros anticipated this year. Spending will total 302 billion euros in 2013, or about 3 percent less than this year.

The coalition made a “major effort” to cut planned borrowing, Norbert Barthle, budget spokesman for Chancellor Angela Merkel’s Christian Union bloc, said in an e-mailed statement. “This is a great success and an important step” on the way to a budget without new debt.

A constitutional “debt brake” obliges the government to rein in spending in stages to ensure the budget is in balance without net new borrowing by 2016. The brake was implemented in 2011 and requires that net borrowing not exceed 41.4 billion euros in 2013, showing that the new plan is within target.

Germany’s debt brake is the model for the European Union’s future “Fiscal Pact.” While Merkel’s government may be on track to fulfill the adopted fiscal goals earlier than expected, her partners in the single currency including France are struggling to satisfy laxer targets set by the euro’s decade-old Stability and Growth Pact.

TLG Sale

Coalition parties, which dominate the budget committee, achieved the planned new savings in borrowing in part by booking 800 million euros in anticipated gains from the sale of the TLG GmbH property unit, Green Party committee member Priska Hinz said in an interview yesterday. The division is being split into its commercial and housing parts, while a portion of the gains from the former will be carried forward into the 2013 budget, Hinz said, citing the Finance Ministry.

The sale of the commercial unit will probably be completed this year and accounted for in the 2012 budget, while the housing asset will be wrapped up next year and accounted accordingly, Hinz said.

Coalition lawmakers are due to brief journalists about the completed 2013 budget draft in Berlin at 12:30 p.m. today.

To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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