Good Deeds vs. No Deficit
May 9, 2007
Debate has heated up among German politicians about how to spend additional tax revenues German Finance Minister Peer Steinbrück is expecting over the next few years.
Germany's Green party has demanded that the finance minister balance the German domestic budget by 2009. Anja Hajduk, Green party expert for domestic finances, told the Berliner Zeitung paper that it would be "absolutely unacceptable" if Steinbrück were to aim for a balanced budget without new debt in 2011.
"People cannot get anywhere if they do not set ambitious goals," she said.
No new debt
She said that in the coming year, new debt should only compose a one-digit sum, so that by 2009, a budget without new debt should be possible.
"Setting 2009 as the goal makes sense since by then four years of successful economic management will have been achieved," Hajduk said.
Axel Weber, president of the German Central Bank (Bundesbank), took it one step further.
"We believe a structurally balanced domestic budget is possible by 2008, 2009 at the latest," Weber told the mass circulation Bild paper.
"We must remain on this steady course of consolidating the budget and should take advantage of the economic upswing to help to us along that path even more," he added.
He said now is not the time for "good deed" politics involving possibly lowering taxes.
Reducing spending
Jürgen Koppelin, domestic budget expert for the free-market liberal Free Democratic party (FDP), agreed. He said reducing new debt to zero would be possible in 2008.
"The budget could be balanced by next year if people really wanted it that way," Koppelin told the Berliner Zeitung.
To achieve that, he said, government spending would have to be reduced.
"But rather than consolidating the budget, Chancellor Angela Merkel prefers to spend money on good deeds," Koppelin criticized.
He said it was irresponsible of ministers in the ruling Christian Democratic-Social Democratic (CDU-SPD) coalition to make new demands for spending when the budget deficit remains huge.
Lowering taxes
Bavarian Economics Minister Erwin Huber of the conservative Christian Social Union, the sister party to the CDU, said however, that taxes should be lowered.
"Of course, budget consolidation should take first priority, but as soon as there's some flexibility, taxes should be lowered, particularly to ease the burden on families," Huber said in Bayrischer Rundfunk public television.
He also said the economic upswing could be used to invest more in future-oriented areas like education, research and child care.
Finance Minister Steinbrück had announced on the weekend that estimations by his ministry saw an additional 90 billion euros ($122 billion dollars) in tax revenues flowing into the central government coffers over the four years to 2011.
Steinbrück told the weekend edition of Die Welt newspaper that the additional tax intake for the whole country -- including the federal government, the 16 states and the local authorities -- could amount to 200 billion euros.
A year ago, Steinbrück's ministry estimated total revenues for the federal government over four years at 877 billion euros, suggesting that the new estimate is some 10 percent higher than previously forecast.
But he warned the additional revenue had to be devoted primarily to consolidating the budget after years of deficits in excess of European Union requirements.
The news magazine Focus reported that Steinbrück was facing increased demands from the big spending ministries, amounting to seven billion euros in 2008 and a total of 28 billion by 2011. Focus cited a list from the finance ministry it had seen.