Germany sees balanced budget from 2015 onwards

German Finance Minister Wolfgang Schaeuble unveiled Wednesday plans to achieve a consistently balanced budget from 2015, the first time that Germany will spend no more than its revenue intake since 1969. "We're keeping our word. We want to go out of this legislative period with no new budgetary debt," Schaeuble told a news conference. Europe's top economy will run up only a small public deficit of 6.5 billion euros ($9.0 billion) in 2014 -- its smallest in 40 years -- down from 22.1 billion euros in 2013, said Schaeuble, who has held the strings of Germany's public purse since 2009. But the budget will be balanced from next year at least until 2018. The government's budget planning represents a break from the past, Schaeuble said. "From 2015 onwards, the government will not take up any additional new debt. We won't spend more than we take in in revenues," he added. At the start of 2013, the minister had suggested that Berlin could begin to repay some of its debt. But the general election last September forced the conservatives to make a few concessions in the area of public investment in order to persuade the Social Democrats into a power-sharing coalition. Nevertheless, with Germany's economic recovery set to continue, Schaeuble said Berlin could reduce its overall debt ratio from 76 percent of gross domestic product (GDP) at present to "below 70 percent" by 2018 and then 60 percent in within 10 years. EU countries are obliged, under membership rules, to limit their public deficits to no more than 3.0 percent of gross domestic product and to achieve balanced budgets or even surpluses in the longer term. And in terms of overall debt, they are not allowed to run up a ratio of more than 60 percent of GDP. Germany's insistence on austerity and keeping to Europe's budget and debt rules, enshrined in the so-called Stability and Growth pact, has earned it a great deal of criticism from its European members. "But we are not asking of anyone else what we're not doing ourselves," Schaeuble insisted. - Recovery helps Germany's finances - Berlin is budgeting for public spending of 298.5 billion euros in 2014. And that figure will rise to 299.7 billion euros in 2015, 309.7 billion euros in 2016, 318.8 billion euros in 2017 and 327.2 billion euros in 2018. The increased spending would not entail taking on any new debt because Schaeuble is counting on the continued good performance of the economy, which should translate into increased tax revenues. Low interest rates would also reduce the burdens of debt repayments. Schaeuble said any financial and economic fallout from the crisis in Ukraine would be "manageable" both for Germany and Europe as a whole. As long as the crisis continued to unfold "rationally... our financial and budget planning will not be negatively affected," the minister said. Turning to the wider economic risks currently facing the euro area, Schaeuble said he sees no signs of deflation, a spectre that is frequently conjured up in face of the current period of ultra-low inflation in the 18 countries that share the single currency. Deflation is a destructive spiral of falling prices in which consumers put off purchases in the hopes of even lower prices, thus destroying salaries, jobs and investment. But Schaeuble said a whole range of economic institutions, including the European Central Bank and Germany's central bank or Bundesbank, see no such risk at present. "I agree with (ECB president Mario) Draghi. I don't see any signs of deflation, either," Schaeuble said. At its regular monthly policy meeting last week, the ECB held off from cutting its key interest rates -- already at all-time lows -- still further, pointing to hopes that the eurozone's crisis-battered economy is slowly on the path to recovery. Schaeuble told the news conference that "from a German point of view, I think we have an interest rate level that's too low in the medium term. "I know that the situation is very different in some other European countries, that's why a common monetary policy isn't quite so easy in Europe," the minister said.