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German 2011 Federal Government Borrowed Less Than Planned

German Chancellor Angela Merkel’s government borrowed less than planned last year as economic growth beat official estimates and unemployment dropped more than forecast to a two-decade low, the Finance Ministry said.

Federal net new borrowing declined to 17.3 billion euros ($22 billion) in 2011 from about 44 billion euros in 2010, the Finance Ministry said in a press release distributed in Berlin today. The federal government’s budget plan originally called for borrowing of 48.4 billion euros in 2011 to finance spending of 305.8 billion euros.

The lower than expected deficit “is a result of growth and confidence in the German economy,” Deputy Finance Minister Steffen Kampeter told reporters in Berlin. “It shows that consolidation and growth are siblings that get along well.”

Germany as a whole had a budget shortfall of 1 percent of gross domestic product in 2011, according to provisional figures published by the Federal Statistics Office yesterday. Merkel’s government violated a European Union rule that limits budget deficits to 3 percent of GDP in the two preceding years.

Kampeter said higher revenue and lower spending squeezed the 2011 deficit, including a “consolidation dividend” from labor-market policies, lower interest costs as a result of Germany’s benchmark status as a bond issuer and higher than expected tax intake.

Germany will probably present a supplementary budget this year if payments to the permanent rescue fund, the European Stability Mechanism, are higher than the 4.5 billion euros envisaged, he said. Kampeter said the 2012 budget will contain an “amount X” for payments into the ESM. The government will attempt to use spending cuts in the execution of the budget to reduce that amount.

The German economy, Europe’s biggest, expanded 3 percent last year, the statistics office said, a faster pace than the 2.3 percent that formed the basis for last year’s federal budget. The economy shrank “roughly” 0.25 percent in the fourth quarter from the third, the statistics office estimated.

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