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Germany pushes down debt below EU ceiling one year earlier than planned

German Finance Minister Olaf Scholz attends a press conference after the federal cabinet meeting in Potsdam, Germany November 15, 2018. REUTERS/Axel Schmidt

BERLIN (Reuters) - German public sector debt has fallen below 60 percent of gross domestic product already this year, Finance Minister Olaf Scholz said on Monday, bringing it below the European Union’s jointly agreed debt ceiling for the first time since 2002.

All member states of the single currency bloc have committed themselves to limit public debt to a maximum of 60 percent. But Germany, the EU’s largest economy, has violated this rule since 2003 every year, as have many other member states.

Scholz, a member of the centre-left Social Democrats (SPD), junior partner in Chancellor Angela Merkel’s government, said that public debt has fallen below the 60 percent threshold this year and this means one year earlier than originally planned.

With this favourable development, Germany is creating fiscal room to manoeuvre which enables the government to react to any crisis without having to ask others for help, Scholz said.

The fiscal achievement by Scholz could turn out to be a double-edged sword for his party that promised more public investments and higher taxes for the rich during last year’s election campaign.

Since taking over as finance minister earlier this year, Scholz has adopted the same fiscal rigour as his conservative predecessor, Wolfgang Schaeuble, by limiting public spending and rejecting the issuance of new debt.

Public support for the SPD has plunged to record lows in recent months, with most polls putting Germany’s oldest party around 15 percent - far behind Merkel’s conservatives and the left-leaning Greens who attract more centrist voters.

Reporting by Gernot Heller and Michael Nienaber; Editing by Mark Heinrich, Richard Balmforth