BERLIN Strong economic growth rather than savings helped Germany borrow nearly two thirds less than originally planned in 2011, but borrowing will rise again this year as Europe's bulwark economy starts to feel the pain of the euro debt crisis.
Net new government borrowing for 2011 was 17.3 billion euros, well below the originally planned 48.4 billion euros and down from November's revised estimate for around 22 billion euros, the Finance Ministry said on Thursday.
This brings the deficit ratio down to one percent of gross domestic product - well under European Union's Maastricht criterion for 3 percent - versus 4.3 percent in 2010.
Borrowing fell from 44 billion euros in 2010 primarily due to a stronger-than-expected tax take from a booming economy, with revenue up 22 billion euros on 2010 at 248.1 billion euros.
"The significant reduction in borrowing was due to economic factors such as tax revenues, and expenditure cuts in the areas of labour market, interest rates and guarantees," the Finance Ministry said in a statement.
Meanwhile spending fell by just 7.5 billion euros to 296.2 billion euros -- relatively little compared to other countries which have been forced to implement painful cuts.
In France, the euro zone's second largest economy, state spending for the first 11 months of 2011 was down 48 billion euros on the year to 335 billion euros, data showed.
Lawmakers from Chancellor Angela Merkel's coalition hailed Germany's lower 2011 borrowing as the result of their growth-oriented policy, while opposition MPs said the government was not making sufficient structural savings.
German expenditure fell in 2011 partly as a result of lower interest payments on existing debt. Some investors this week even paid to hold short-term German treasury bills because they see the country as a safe place to park their money.
A fall in the jobless rate to its lowest in two decades has also reduced the state's outlays on unemployment benefits.
However, employment trends lag changes in growth. And while Germany's economy, a star performer in the industrialised world since the end of the 2008 financial crisis, grew 3.0 percent in 2011, it shrank in the last quarter.
Economists now widely expect German economic growth to slow in 2012 to between 0.5 and 1.0 percent.
Berlin has said it plans new borrowing to rise to 26.1 billion euros, with expenditure rising to 306 billion euros. It still aims however to stick to its debt brake and bring new borrowing down to a maximum of 0.35 percent of gross domestic product by 2016.
The Finance Ministry noted it may also have to pass a supplementary budget, depending on how much European leaders agree to contribute to the European Stability Mechanism - the permanent bailout fund for euro zone states.
European leaders agreed in Brussels last month to accelerate the launch of the ESM by a year to mid-2012, as part of measures aimed at putting an end to the crisis. Germany had originally planned a first installment of 4.3 billion euros.
(Additional reporting by Leigh Thomas in Paris, Editing by Patrick Graham/Ruth Pitchford)
Trending On Reuters
Anil Ambani's Reliance Group has never made a military helicopter, missile system or submarine in its history but that isn't stopping the Indian tycoon from seeking to win contracts to manufacture all of that military hardware and more. Full Article