Berlin- The German government's new borrowings are set to
soar to a record 310 billion euros (437 billion dollars) in the years
to 2013, the government said outlining its latest draft budget plans
Wednesday.
With Europe's biggest economy battling to emerge from its deepest
recession in more than 60 years, German Finance Minister Peer
Steinbrueck said there was no alternative to the higher borrowings.
Steinbrueck said in an interview with the daily Tagesspiegel that
the nation's next government, due to be elected in September, is
facing a 'mammoth task' in trimming back the debt levels with the
nation's deficit set to bust the strict 3 per cent fiscal target for
euro member states this year.
The German cabinet signed off Wednesday on Steinbrueck's draft
2010 budget, which includes net new borrowings hitting a record 86.1
billion euros next year compared to 47.6 billion euros this year.
However, Germany's total debt could balloon out to over 100
billion in 2010 as a result of the government's more than
80-billion-euro fiscal stimulus plans and a series of bank bailouts.
In an interview with the German daily Frankfurter Allgemeine
Zeitung published Wednesday Steinbrueck warned that he expected
Brussels to launch next year a case against Berlin for breaching the
euro member-states budget rule.
The release of the German budget details came as the Paris-based
Organization for Economic Cooperation and Development (OECD) said it
was slashing its 2009 forecast for the Germany's economy, and warned
about the threat of sharply rising unemployment.
Instead of a previously forecast 5.3-per-cent contraction, the
OECD said it now expects the German economy will shrink by 6.1 per
cent this year, which is in line with other bleak for forecasts for
the nation.
However, a slew of forward-looking economic indicators have been
pointing to the recession starting to loosen its grip on Germany,
with economic growth in the nation gaining traction.
'Hopes of an end of to the steep economic descent have been
strengthened in the last few weeks,' said the German Banking
Association in its latest review of the nation's economy released
Wednesday.
But in its latest projections, the OECD said it expects Germany to
post a meagre 0.2-per-cent growth rate in 2010.
Moreover, the banking association also warned in its report that
it could might take until at least 2015 for Germany's economy to
repair the damage caused by the financial firestorm, which emerged in
the US last year and plunged the world economy into a dramatic
downturn.
While the OECD said it expects the gradual improvement in world
trade to help spur a recovery in Germany, the organization warned
that overhanging the nation's upturn will be escalating unemployment.
Germany's unemployment rate will rise to 8.7 per cent in 2009
before hitting 11.6 per cent in 2010, the OECD forecast.
Indeed, the biggest increase in outlays in Steinbrueck's 2010
budget is for the ministry of labour and social affairs, which
includes spending on pensions and unemployment benefits.
Government outlays for the ministry are projected to jump by about
20 per cent next year to 153.15 billion euros.
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