Germany will not be able to bring its budget deficit to within European Union limits until 2013 or 2014 because of the recession, Finance Minister Peer Steinbrueck said on Wednesday. "Based on the current economic forecasts, we will not be below the upper deficit level until 2013 or 2014," Steinbrueck told the Frankfurter Allgemeine Zeitung daily in an interview.
According to EU rules, member state budget deficits are not allowed to breach three percent of gross domestic product (GDP), while a country's public debt is not permitted to exceed 60 percent of GDP. Later on Wednesday, Chancellor Angela Merkel's cabinet was expected to sign off on budget plans for 2010 that lay bare the extent to which the recession has blown a huge hole in Germany's public finances.
According to provisional figures released last week, Germany will be forced to take on some 310 billion euros (430 billion euros) in new debt over the period 2009-2013. In a separate interview with radio station Deutschlandfunk, Steinbrueck said the ballooning of the country's deficit was "in fact a one-off and will hopefully remain a one-off. "This country is currently experiencing its worst economic crisis for 60 years and we are looking at a slump in growth of six percent," Steinbrueck said.
Given the downturn, Germany has been "forced" to inject billions of euros into the economy to boost consumption, resulting in what Steinbrueck described as the "monstrous" explosion in the country's deficit. However, the minister vowed to return to a path of budgetary consolidation when the crisis was over.
"I will argue very strongly that the disciplinary peg ... should be maintained, to signal clearly, not just to citizens but also to the financial markets, that we must go back to consolidation when we are out of this extraordinary and unusually hard recession," he said. Steinbrueck also predicted that Europe's biggest economy would bounce back in 2010 with growth of 0.5 percent. "That is really not an over-estimation," he said.