Germany Trims Planned Bond Sales Amid Spending CutsBrian Parkin
German Chancellor Angela Merkel’s government expects to cut planned 2014 bond sales, predicting increased tax collections and reduced spending will help keep its budget balanced, a draft federal spending plan shows.
Germany plans to sell 216.5 billion euros ($287 billion) of bonds in 2014 compared with 240 billion euros this year, the 3,358-page document shows. That includes 107.6 billion euros of bonds with a maturity of at least four years, compared with 114.5 billion euros this year, the provisional plan shows.
Sales of debt with a maturity less than four years, including bills, will be cut to 108.9 billion euros from 125.6 billion euros, according to the draft, a copy of which was obtained by Bloomberg News. The provisional sales program was compiled the Finance Ministry for the 2014 budget, which sets a spending ceiling of 295.4 billion euros against expected outlays this year of 310 billion euros.
Finance Ministry spokesman Bertrand Benoit said in a telephone interview that he was not immediately able to comment on the budget draft, which was distributed to lawmakers in Berlin yesterday.
The yield of Germany’s benchmark 10-year bund increased seven basis points, or 0.07 percentage point, to 1.77 percent at 10:49 a.m. London time, the highest level this month. The 1.5 percent security due in May 2023 fell 0.62, or 6.2 euros per 1,000-euro face amount, to 97.60.
Tax-revenue growth and spending curbs will narrow the gap that Merkel has to close with net new credit next year. Revenue from taxes and fees will add up to about 288 billion euros or 6.1 billion euros less than spending, the draft shows. The gap will be closed by tapping bond sales equal to that amount.
Fitch Ratings last week affirmed Germany’s long-term foreign and euro default ratings at AAA with its outlook stable. “The government has overachieved on some key fiscal targets,” Fitch said in an e-mail. Federal debt climbed to 1.29 trillion euros by March 31, compared with the 636.5 billion euros owed by the states.
Merkel’s Christian Democrats have pledged to cut taxes if she wins a third term in Sept. 22 elections. Merkel’s challenger, Social Democrat Peer Steinbrueck aims to raise income taxes if elected. Steinbrueck’s SPD plan to lift the top tax rate to 49 percent from 42 percent.