Germany's budget deficit will remain in breach of a European Union limit of three percent of gross domestic product (GDP) this year, a government source told Reuters on Sunday.
Finance Minister Peer Steinbrueck's budget planning for 2007 through 2010 notes that the 2006 budget shortfall will be "still slightly above the three percent limit", according to the source, who asked not to be identified by name. Steinbrueck said late last month the deficit in Europe's biggest economy could drop below three percent of GDP this year after Berlin breached the ceiling for four straight years, triggering an EU disciplinary procedure.
According to the source, part of the reason Germany's deficit will stay above three percent in 2006 is a package of measures worth 25 billion euros ($31.8 billion) the government hopes will spur the economy.
Germany's deficit would drop back below the EU limit next year, shrinking to around 2.5 percent of GDP, the source added. Thereafter, the shortfall would decline by 0.5 percent of GDP, reaching 1.0 percent by 2010.
To help consolidate its public finances, Germany will use some revenue from a three-percentage point increase in sales tax set to take effect at the beginning of next year.
Net new borrowing by the federal government is set to decline next year to 22 billion euros from 38.2 billion euros in 2006, the finance ministry said on Saturday.
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