Germany Trims Deficit Plan in Merkel’s Pursuit of Budget Balance

Germany trimmed next year’s federal budget-deficit forecast by another 0.2 billion euros ($0.3 billion) compared with the government’s projection in March, according to a Finance Ministry document.

The revised budget outline, given to reporters by ministry officials in Berlin yesterday, reaffirms Chancellor Angela Merkel’s goal of a “structurally” balanced budget next year and no new debt in 2015, part of her effort to set an example of fiscal discipline for the euro region. The federal government of Europe’s biggest economy will probably post a structural surplus of about 2.2 billion euros in 2014, the document shows.

Next year’s projected net new borrowing of 6.2 billion euros compares with deficit projections of 6.4 billion euros in the March medium-term budget outline and 13.1 billion euros last November. The Finance Ministry plan would reduce the deficit mostly by trimming spending.

Interest payments on the national debt were projected to decline by 5.2 billion euros next year as Germany benefits from record-low borrowing costs, reflecting its haven status as the recession in the euro area extended to a record sixth quarter.

An 8 billion-euro bill for floods that engulfed Germany this month will be added to the 2013 budget, according to the document, which projects an average annual increase in German government spending of 1.4 percent between 2015 and 2017.

Federal funding for Merkel’s plan to phase out nuclear power and further boost renewable energy will increase by 650 million euros next year to compensate for a lack of revenue from carbon-permit trading, according to the document.

The Finance Ministry data are the basis for spending plans that the German government submits to lawmakers. Merkel’s Cabinet will take up the budget plan on June 26.

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

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

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