The state of Germany's public finances remains "very serious", despite the recent progress the government has made in reining in the public deficit, German Finance Minister Peer Steinbrueck said Tuesday.
"People think I can hold out my arms and manna will fall from heaven into them," he told ZDF television. "In spite of recent satisfactory developments, the situation remains very serious." Last week, data showed that Germany was making good progress in its efforts to rein in its public deficit as required under EU rules set out by the Stability and Growth Pact.
Germany ran up a public deficit of 28.2 billion euros (36 billion dollars) in the first six months of the current year, equivalent to 2.5 percent of gross domestic product (GDP), the data showed.
It was the first time since 2001 that the deficit ratio had been below the 3.0-percent limit set by the stability pact. The development was attributable to high tax revenues in the January-June period, stronger economic growth and falling unemployment.
In Nuremberg, for example, the Federal Labour Agency said it expected to end the year with a bigger budget surplus than expected because of its new streamlined structure under the government's labour market reforms and lower unemployment payouts.
But Steinbrueck warned that there was no cause to sound the all-clear yet on Germany's public finances.
"It has been forgotten that Germany has 1.5 trillion euros in debts and that the government is paying out 40 billion euros in interest payments on that debt and investing just 22 billion euros for the future," the minister said.
A number of regional state premiers, including the prime minister of the central state of Hesse Roland Koch and his counterpart in the Saar region Peter Mueller, have suggested that the additional tax revenues be used to finance reductions in wage costs. Some observers have even suggested that the unexpected improvement in government finances could persuade Berlin to revise its plans to raise value-added tax from next year. But Steinbrueck received the support of other key government figures, including Chancellor Angela Merkel and her number two, Franz Muentefering, who both advocated budgetary rigour. Merkel said that any additional revenues must first be used to reduce the deficit.