November 19, 2016 / 1:26 PM / in 3 years

Germany's Merkel says to spend more on infrastructure in election year

BERLIN (Reuters) - German Chancellor Angela Merkel promised on Saturday to increase investment in infrastructure in Europe’s biggest economy in 2017, an election year, without resorting to new borrowing.

German Chancellor Angela Merkel speaks during a joint news conference with Spain's Prime Minister Mariano Rajoy at the chancellery in Berlin, Germany, November 18, 2016. REUTERS/Fabrizio Bensch

Germany, which runs a budget surplus, has resisted pressure from European peers to spend more to help boost euro zone growth and last week the European Commission effectively urged Germany to loosen its purse strings next year.

In her weekly podcast, Merkel - who is expected to announce on Sunday that she will run for a fourth term as chancellor next year - said her government would raise spending on roads, railways and broadband as well as on education.

Despite the increase in spending next year, “there will be no new debts at the cost of future generations”, Merkel said.

She also said money spent on integrating migrants was “a good investment” as it would mean they would be able to use Germany’s education system and then join the workforce.

Fears about the integration of almost 900,000 migrants last year, many from war zones in the Middle East, have dented Merkel’s popularity but her government argues that many will in the long run be a valuable part of the labour force.

Finance Minister Wolfgang Schaeuble has planned a balanced budget for the next four years.

A document showed on Friday that Merkel’s conservative Christian Democrats (CDU) plan to divide surplus tax revenues between infrastructure investment, tax relief and spending more on foreign and security policy.

Merkel also said she wanted to increase spending further on defence and on the NATO alliance. “Security plays an important part and that is not just the case since the election of a new president in the United States,” she said.

The German parliament debates the government’s budget proposals next week. Last month, the government raised its growth forecast for this year to 1.8 percent from 1.7 percent

Reporting by Madeline Chambers; Editing by Dale Hudson

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