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Germany to lift spending, keep balanced budget up to 2021 - govt document

BERLIN, March 10 (Reuters) - Germany plans to boost government spending by a total of more than 38 billion euros ($40 billion) by 2021 without straying from its goal of keeping a balanced budget, according to a draft finance ministry document seen by Reuters on Friday.

The arrival of more than 1 million migrants to the country over the past two years has raised questions over whether Berlin can stick to its cherished “schwarze Null”, or balanced budget, despite the costs of accommodating and integrating the refugees.

Spending will rise to 355.6 billion euros in 2021, under the plan, from 317.4 billion euros last year - an increase of 38.2 billion euros. But with tax revenues expected to keep going up and borrowing costs to remain low, the finance ministry document does not foresee the need for net new borrowing.

Defence spending, which was 35.13 billion euros in 2016, will rise to 38.45 billion euros in 2018, under the plans - a figure that is projected to represent 1.23 percent of economic output.

U.S. President Donald Trump has called on Germany and other NATO members to accelerate efforts to meet the alliance’s target of spending 2 percent of economic output on defence.

Berlin plans to increase its defence spending to 42.297 billion euros in 2021, according to the draft document, which is still likely to be short of the 2 percent mark.

Next year, the government plans to increase overall spending by 1.9 percent to 335.5 billion euros, with the extra money mainly going to refugee integration, development aid, defence and domestic security.

The document also shows the government wants to reduce its overall debt to less than 60 percent of gross domestic product in 2020 for the first time since 2002, meeting a criterion set out in the EU’s Stability and Growth Pact.

The German cabinet is expected to approve the draft plans - the 2018 budget and financing plan up to 2021 - in June. But the country is heading towards a federal election in September and the budget plan may be subject to revisions if a new coalition takes power.

The federal government has kept balanced budgets since 2014 and it decided in 2015 that all federal surpluses would be put aside for integrating refugees and addressing the root causes of migration.

$1 = 0.9403 euros Reporting by Michael Nienaber; Additional reporting by Andrea Shalal; Editing by Erik Kirschbaum and Pravin Char