September 17, 2015 / 3:02 PM / 4 years ago

Ballooning refugee costs threaten Germany's cherished budget goals

BERLIN (Reuters) - The unexpected cost of looking after a record influx of refugees in Germany could scupper Finance Minister Wolfgang Schaeuble’s cherished goal of achieving a balanced budget for the next five years, coalition sources said on Thursday.

Migrants rest on camp beds at a temporary shelter in Freilassing, Germany September 17, 2015. REUTERS/Michaela Rehle

Germany is shouldering most of the burden of the continent’s biggest refugee crisis since World War Two and expects at least 800,000 asylum seekers this year alone.

But its generosity comes at a cost. Local authorities in Europe’s largest economy are clamoring for cash to house, care for and integrate asylum seekers fleeing wars in the Middle East, Asia and Africa. Federal government spending on benefits is also likely to rise.

There may also be a political cost. Chancellor Angela Merkel’s right-left coalition, which has preached fiscal discipline to euro zone countries in the last five years, has promised to balance the budget from this year through 2019.

Schaeuble has even boasted about achieving a ‘schwarze Null’ or black zero, meaning a balanced budget, for the first time since 1969 in 2014 - a year earlier than planned - thanks to strong tax revenues and low interest rates.

Berlin is on track to achieve this goal again this year but the long term aim of no new net borrowing is at risk.

“The ‘schwarze Null’ looks shaky,” said a coalition member.

No-one can put a figure on the total cost of the refugee crisis but some experts think it could add up to around 9 billion euros next year, especially if the number of refugees exceeds current forecasts, as seems likely.

In addition to 1 billion euros put aside for 2015, coalition members say 6 billion euros could be freed up next year.

Half would go to federal states and local authorities which are struggling to provide basic care for people who have risked their lives in long journeys to Europe. The rest would help pay for welfare costs such as unemployment benefits.

But several coalition sources say the federal states and local authorities will need nearer 6 billion euros and that the total could rise to 9 billion euros.

“(Even) that is rather a conservative estimate,” said one coalition source.

Among Schaeuble’s conservatives, the ‘schwarze Null’ is something of a holy grail. He has said he wants to finance the refugee crisis without net new borrowing if possible.

But if he is to stick to the goal, Schaeuble may face a stark choice between raising taxes - anathema to most conservatives, or imposing spending cuts - unacceptable to the Social Democrats (SPD) who share power in Merkel’s coalition.

The SPD has dismissed talk of a ‘mini austerity package’ that would force ministries to save 500 million euros in 2016.

“We are facing a historic challenge that we won’t do justice to with bean-counting,” SPD General Secretary Yasmin Fahimi told Der Spiegel Online.

Writing by Madeline Chambers; Editing by Hugh Lawson

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