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Germany should ditch austerity, embrace EU investment: Gabriel

BERLIN (Reuters) - Germany should send a new message to the European Union that investment is more important than austerity, Foreign Minister Sigmar Gabriel said in a guest article to be published in the conservative daily Frankfurter Allgemeine Zeitung on Wednesday.

FILE PHOTO: Social Democratic Party (SPD) leader Sigmar Gabriel addresses an SPD party convention in Berlin, Germany, March 19, 2017. REUTERS/Axel Schmidt

To back up the message, Berlin should offer to further increase its contribution to the EU budget, Gabriel, a Social Democrat in coalition with Chancellor Angela Merkel’s conservatives, said.

He said the German economy would benefit strongly from rising investment levels in Europe.

Germany is gearing up to for what is expected to be a close-run federal election in September and Gabriel’s comments are the clearest sign yet that his Social Democrats want to distance themselves from the budget rigor advocated by Merkel’s party.

“Every euro that we make available to the EU budget comes back to us several times, directly or indirectly”, Gabriel writes, according to a text pre-released on Tuesday.

Gabriel stood aside in January for former European Parliament president Martin Schulz to take over as leader of the Social Democrats, who have since enjoyed a revival in support that threatens Merkel’s bid for a fourth term.

Germany, Europe’s largest economy, already makes the largest net contribution to the EU budget each year at over 15 billion euros ($16.22 billion). The sum could swell by 4.5 billion euros per year in 2019 and 2020 after Britain leaves the bloc.

Gabriel criticized the conservatives for preaching austerity and structural reforms to its European partners when Germany itself only managed to successfully reform its own economy by first loosening EU budget rules and increasing its deficits.

The result of this strategy has been an economically strong Germany that now is able to easily stick to budget rules and even lower its debt burden, Gabriel writes.

Finance Minister Wolfgang Schaeuble, a senior member of Merkel’s conservatives, has become a hate figure in some European countries for his insistence on fiscal rigor and budget rules. But he is one of the most popular politicians in Germany.

Schaeuble last week presented the preliminary framework for Germany’s 2018 federal budget and his fiscal plans until 2021. These outlined a gradual increase in state spending until 2021 without net new debt, sticking to Berlin’s goal of running a balanced budget despite international calls to hike investment more strongly in infrastructure and defense.

A possible coalition government led by the center-left Social Democrats could put greater emphasis on investment. This means that the budget plans for 2018 and beyond could be subject to revisions if a new coalition takes power.

Reporting by Michael Nienaber,