January 13, 2016 / 10:52 AM / 4 years ago

Germany to use bigger-than-expected budget surplus on refugees

BERLIN (Reuters) - Germany achieved a larger-than-expected budget surplus of 12.1 billion euros in 2015 and will use the windfall to finance the additional costs of accommodating and integrating refugees, Finance Minister Wolfgang Schaeuble said on Wednesday.

German Finance Minister Wolfgang Schaeuble uses his phone during a session of the German lower house of parliament, the Bundestag, in Berlin, Germany November 25, 2015. REUTERS/Fabrizio Bensch

The surplus, due to higher tax revenue and the auctioning of mobile telephone licenses, is roughly twice the expected 6.1 billion euros. It increases the chances of Germany maintaining a balanced budget for the third straight year in 2016.

“We’ll urgently need the reserve to finance the additional spending on accommodating and integrating refugees,” Schaeuble said in a statement.

He added that achieving another balanced budget this year was realistic despite the ballooning refugee costs.

While record-high employment and rising wages are boosting revenue from income tax, strong private consumption is pushing up receipts from value-added tax.

A senior government official said it was hard to predict how the federal budget would develop because nobody could say how many refugees would arrive in Germany this year and beyond.

Germany is at the center of Europe’s biggest migrant crisis since World War Two, with over 1 million people having arrived in the country in 2015 alone, far more than any other EU country.

Under German law, funds unspent at the end of the year should be used to repay debt.

However Chancellor Angela Merkel’s ruling coalition agreed last year to funnel all extra money from 2015 into a reserve to pay for refugee-related costs.

The DIW economic institute estimates that state spending on refugees will rise from roughly six billion euros last year to 15 billion euros in 2016 and 17 billion in 2017, boosting private consumption and giving the construction sector an additional push.

Reporting by Michael Nienaber; Editing by Noah Barkin and Hugh Lawson

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