Bundesbank head warns Merkel on increased state spending: report

BERLIN Sat Oct 19, 2013 8:49am EDT

The entrance of the Bundesbank headquarters is pictured in Frankfurt May 17, 2013. REUTERS/Kai Pfaffenbach

The entrance of the Bundesbank headquarters is pictured in Frankfurt May 17, 2013.

Credit: Reuters/Kai Pfaffenbach

BERLIN (Reuters) - The head of the German Bundesbank has told Chancellor Angela Merkel to keep a tight grip on government spending in coalition talks with the center-left Social Democrats (SPD) next week, in which she faces pressure to boost investment funding.

"It is important to shape public budgets in a way that preserves a safe distance to the net new borrowing ceiling, to avoid unpleasant surprises," Jens Weidmann told the business magazine Wirtschaftswoche on Saturday.

Coalition talks between Merkel's conservative block and the SPD are due to begin on Wednesday. Leading members of both camps have demanded more spending on Germany's neglected infrastructure as well as education in the coming years.

The SPD wants to finance such investments through higher taxes on the most wealthy, but Merkel has pledged she will not pursue that option.

(Reporting by Michael Nienaber. Editing by Jane Merriman)

Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.