October 31, 2012 / 3:50 PM / 5 years ago

UPDATE 1-German finance minister sees balanced budget by 2014

* Germany targets structurally-balanced budget by 2014

* Strong tax revenue growth to taper off from 2013

* Merkel coalition debates how to relieve taxpayers

By Sarah Marsh

BERLIN, Oct 31 (Reuters) - Germany has its sights on a balanced budget by 2014 but strong recent growth in tax revenues will tail off from next year, Finance Minister Wolfgang Schaeuble said on Wednesday.

Germany’s income from tax receipts should be 5.8 billion euros higher than previously forecast in 2012, the Finance Ministry said on Wednesday, although it will inch below previous estimates in three of the following four years.

Chancellor Angela Merkel’s government has hiked its forecast for 2012 growth by 0.1 percentage points to 0.8 percent but cut its 2013 growth forecast to 1 percent from 1.6 percent due to the weak economy across Europe.

“We are striving for a structurally-balanced budget for 2014,” Schaeuble said.

The minister was quoted last weekend as saying Germany could cut its structural deficit — which does not account for economic fluctuations — to 0.35 percent of gross domestic product in 2013, three years ahead of a constitutional deadline.

Presenting the latest tax revenue estimates for 2012-2016, he said the tax numbers “correspond with an economy that is on a moderate growth course” but still meant that Germany was the “stability anchor and growth locomotive of the euro zone”.

Germany has proven resilient to the euro zone’s three year-old debt crisis and its economy has grown steadily throughout this year, though there are signs it is heading towards stagnation in the final quarter.

Even as its peers within the currency bloc struggle with austerity measures and rising joblessness, German unemployment has remained at its lowest rate since reunification and wages have risen, boosting tax revenues.


The panel of experts working for the ministry said it expected the tax take to be 602.4 billion euros this year, higher than the 596.5 billion forecast in May.

The forecasts are derived from estimates delivered by the Finance Ministry, Bundesbank and the German council of economic experts.

“With the extra income in 2012 we can further reduce our net new borrowing,” Schaeuble told a news conference. “Our policy of growth-friendly consolidation works.”

However, from 2013 until 2016, the tax take is expected to fall marginally below the May forecasts, except for 2014 when it is seen slightly above the previous estimate.

With one year to go to a federal election when she is likely to seek a third term, the conservative chancellor Merkel may use the improved tax projection for 2012 as backing for a raft of disputed tax and welfare measures to stimulate the economy.

But the centre-left opposition argues that tax cuts are irresponsible at a time of budget and debt consolidation and may find justification for its stance in the gloomier outlook for German tax revenue growth from 2013 onwards.

The opposition has already blocked one government attempt at tax relief worth 6 billion euros in the Bundesrat upper house of parliament, where Merkel no longer has a majority.

Merkel’s own coalition has been embroiled in bitter internal disputes, especially between her Christian Democrats and their partners among the Bavarian conservatives and the Free Democrats (FDP), about whether to scrap a fee for medical appointments or give money to stay-at-home parents, among other proposals.

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