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Germany wants to use 6.2 billion euro budget surplus to amortize debt
January 12, 2017 / 11:08 AM / a year ago

Germany wants to use 6.2 billion euro budget surplus to amortize debt

BERLIN (Reuters) - Germany’s federal government posted a budget surplus of 6.2 billion euros (5.38 billion pounds) last year, helped by a strong economy and low borrowing costs, and Finance Minister Wolfgang Schaeuble said he wanted to use the windfall to amortize debt.

The conservative minister’s comments are unlikely to please Germany’s European and other international partners, which have long urged Berlin to use its robust public finances to stimulate domestic demand to help revive the euro zone economy.

It is the third consecutive year that Germany, Europe’s biggest economy, has not needed net new borrowing, said the finance ministry, adding that the 2015 federal surplus was 12.1 billion euros.

Schaeuble said the surplus was partly a result of special circumstances, namely very low interest rates.

“So it is even more important to use these circumstances to make provisions for the future,” he said in a statement.

“I will suggest to the lower house of parliament that this surplus of 6.2 billion euros is used to amortize debt,” he added, arguing that this would strengthen the long-term sustainability of Germany’s public finances.

In an election year, the surplus has triggered a debate among Chancellor Angela Merkel’s conservatives and her Social Democrat (SPD) coalition partners over whether the windfall should be used to pay off old debt or raise public investment.

Some Bavarian conservatives have called for tax cuts.

“We should give citizens something back. In view of low interest rates and rising inflation, we need quick tax reductions,” Markus Soeder told Bild daily.

Senior government sources said Berlin wanted to send a signal to European and other countries that having a budget surplus was not at odds with achieving growth.

“We are showing that both are possible,” said one source.

The German economy grew by 1.9 percent in 2016, the strongest rate in five years, the Federal Statistics Office said earlier.

Reporting by Gernot Heller; Writing by Madeline Chambers; Editing by Gareth Jones

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