December 21, 2017 / 1:00 AM / a year ago

Rising tax revenues could cheer German coalition negotiators

FILE PHOTO: A container ship is seen at the shipping terminal Eurokai in the Port of Hamburg, Germany November 6, 2017. REUTERS/Fabian Bimmer/File Photo

(Reuters) - Germany’s economy should continue its current robust growth trajectory in the coming months before reverting to trend growth level in the medium term, the finance ministry said in a monthly report published on Thursday.

Based on data released over the final quarter, the report could prove good news for the parties preparing to start talks on forming a new coalition government in January, suggesting there may be fiscal space to deliver on some of the pricier social policy demands set by the Social Democrats (SPD).

“The favourable economic conditions and all the latest monthly indicators suggest that the economic upswing will continue in coming months,” the ministry said. “In the mid-term, it should slacken and return to the potential growth path.”

A survey by the Munich-based Ifo institute on Tuesday said economic uncertainty over a record delay in forming a government was beginning to cloud the outlook for businesses as they contemplated making further investments.

Although the institute’s business climate index came in below a Reuters consensus forecast, economists said the economic buoyancy was set to continue.

The buoyant economy yielded rising tax returns, the finance ministry said, with income tax revenues going up 5.6 percent over the previous year and turnover tax take up 6.3 percent.

The positive news came as Chancellor Angela Merkel’s conservatives gear up for tricky talks in January on forming a government with the Social Democrats (SPD).

Solid government revenues could help the SPD overcome nervousness about risking further voter disenchantment if they enter a renewed “grand coalition” with Merkel.

The party’s restive membership hopes to set a distinctive, and potentially expensive, social democratic stamp on any government programme in wide areas of labour, health and education policy.

Reporting by Thomas Escritt; editing by Mark Heinrich

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