Merkel Budget Gets Double Boost in June on Revenue and ECB Rates

German Chancellor Angela Merkel’s budget got a double boost in June as federal tax revenue surged and low benchmark interest rates trimmed the cost of servicing debt, the Finance Ministry said in its monthly report.

Federal tax revenue jumped 10.9 percent in June compared with a year ago while spending declined by 0.4 percent, the report showed today. State tax revenue grew by 19.6 percent, helped by property transaction levies and inheritance tax.

“Continuing the trend of recent months, the positive development in federal spending is due in particular to reduced interest payments,” the report said. The report didn’t provide an outlook for the economy in the second half.

Low interest on debt service and rising tax receipts supply positive mid-year signals to the government in its bid to balance the budget. Merkel aims to run a near-balanced budget this year and forgo net new borrowing in the 2015 budget for the first time since 1969.

Opposition-party budget experts including Green Party lawmaker Sven-Christian Kindler said Merkel’s budget targets depend on interest rates over which the government has no control.

The European Central Bank on July 3 kept its benchmark rate at 0.15 percent while average June bund yields were 1.25 percent, 13 basis points above the record low of 1.127 percent reached in 2012.

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