Merkel’s Cabinet Approves Budget Plan That Seeks to Cut Deficit

German Chancellor Angela Merkel’s Cabinet approved a budget plan that aims to cut the country’s net borrowing next year and begin running surpluses from 2015, redoubling the government’s pledge to cut its deficit.

The finance plan reduces Germany’s net new federal borrowing requirement to 6.4 billion euros ($8.3 billion) in 2014 from 17.1 billion euros this year, according to a draft. Helped by a surge in tax revenue supported by a stable economy and robust labor market, Merkel’s government will reduce borrowing to the lowest level in four decades.

Germany will for the second straight year meet its obligations under the German-led fiscal compact established last year to combat the European debt crisis. Merkel’s reliance on economic growth may also provide ammunition for critics of her austerity-first agenda.

Germany will cut spending to 297 billion euros next year from 302 billion euros this year, according to the draft. Still, the opposition-dominated upper house of parliament, or Bundesrat, is withholding approval of the bill.

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