Are you sure?

Steinbrueck: German ‘09 borrowing over €50 bln

Germany’s new net borrowing will rise in 2009 to a record level that far exceeds €50 billion but it is still unclear by how much, Finance Minister Peer Steinbrueck said on Saturday.

“The new borrowing will be well above €50 billion,” Steinbrueck told Reuters on the sidelines of a campaign rally in the western German town of Halle on Saturday.

“I can’t yet say how far above that the new borrowing will be,” he added. “We will have to wait to see what the new estimate for tax revenues is in mid-May. So until then there’s no need to speculate.” He had also told the Welt am Sonntag newspaper that new borrowing would exceed €50 billion, saying: “We’re experiencing the worst economic decline in the country’s history.”

The Finance Ministry’s budget for 2009 includes a new borrowing requirement of only €36.8 billion. But it does not include additional funds including in the government’s second stimulus package or support to help stabilize banks.

Several members of parliament have warned that the new borrowing requirement for 2009 could actually rise to up to €90 billion -- double the amount in the budget. They also said that a second supplementary budget would be needed this year.

“It’s not unrealistic that the new federal borrowing will be between €80 to 90 billion -- including the special fund for the financial markets and the economic stimulus measures,” Steffen Kampeter, a member of Chancellor Angela Merkel’s Christian Democrats, told the Financial Times Deutschland.

Several other parliamentary budget experts in the opposition Free Democrats and Greens also expect new borrowing to be more than twice the amount in the current budget, a figure based on the government’s previous forecast of a 2.25% fall in gross domestic product in 2009.

The government is expected to revise that forecast sharply downwards next week. Steinbrueck said on Wednesday it was "not unlikely" that the economy would shrink by more than 5% or more this year.

FORCED TO SPEND MORE

In an interview with four Berlin school children aged 11 to 13 for Welt am Sonntag, Steinbrueck said new borrowing in 2009 was “extremely high” and admitted he was “somewhat depressed” his goal of a balanced budget by 2011 would not be reached.

“If the economy didn’t get caught up in the worldwide crisis I could have reached the goal of having a balanced budget in 2010 or 2011,” he told the 7th grade students. “That would have been the first time that happened since 1969. But what would have happened if we didn’t do anything in this economic crisis? Just leave things the way they are? I believe that we were forced to act as we have.”

Steinbrueck said the government had no choice but to increase new borrowing to stimulate the economy in the crisis. “We can’t cut spending in the crisis because that would only make things worse,” he said when asked why the government did not reduce its spending instead. “But one has to pay that borrowed money back when things are going better. That wasn’t done over the last three decades and that’s the real problem right there.”

Steinbrueck was also asked by one of the students if Germany was in danger of going bankrupt: “No, you must have heard about that in a horror film! Germany is one of the strongest countries in the world. We’ll master this crisis.” Steinbrueck, who also admitted that he sometimes enjoyed fighting with other government leaders, was asked about a recent opinion poll that showed him to be the country’s third most popular leader: “That surprises me too,” he said. (Reuters)