Germany’s outgoing government posted a budget surplus of 5.3 billion euros ($6.35 billion) in 2017, highlighting the solid fiscal position for the potential coalition parties currently in talks to form the new government.
“The fiscal situation of the federal government is good, but money doesn’t grow on trees,” said a senior finance ministry official, who declined to be named.
The surplus will be added to provisions put aside for accommodating and integrating the roughly 1.3 million asylum seekers who have arrived in Germany since 2015, with the reserves now reaching almost EUR24 billion, a second official said.
The news comes as Chancellor Angela Merkel’s conservatives and their center-left rivals, the Social Democrats, reached Friday a preliminary agreement on a forging a coalition government. The deal foresees some EUR46 billion in new expenditures, a leeway identified previously by the finance ministry.
The parties plan mainly for more money to be distributed to state pensions and benefit increases. It also includes a EUR10 billion tax cut over four years, which is smaller than anticipated and will only benefit low earners.
The finance ministry said the strong economy, higher tax revenues and less transfers to the European Union helped achieve the fourth budget surplus in a row.
On Thursday, government data showed that Germany’s economy grew by 2.2% in 2017, propelled by a buoyant labor market and a pickup in government spending.
Overall government spending reached EUR331.0 billion in 2017, EUR1.9 billion more than penciled into the budget, with tax revenues overshooting the previous target by EUR8.3 billion.
The potential coalition partners have previously said they aim to have a balanced budget through 2021.
Source: Dow Jones