Enjoying a balanced budget, Germany will boost spending: govt sources

[BERLIN] After balancing its budget for the first time in almost half a century, Germany's government plans to increase spending on infrastructure and foreign aid over the next five years, senior government sources said on Friday.

Berlin achieved the so-called "schwarze null" (black zero) - a federal budget in the black, or fully balanced - a year early, in 2014, a boon for Angela Merkel's coalition government that has preached budget discipline to its euro zone partners.

But Europe's biggest economy has come under international pressure to help global growth by loosening its purse strings and raising public spending to fix creaky infrastructure while it can benefit from rock-bottom interest rates.

As part of a supplementary 2015 budget to be debated by the cabinet on Wednesday, the government plans to increase spending by 4.2 billion euros (US$4.5 billion) to 302.6 billion euros this year, the sources said - but without straying from the balanced budget.

This includes a one-off payment of 3.5 billion euros into a new investment fund for financially weak local communities.

For 2016, the government expects to increase spending by 3.3 per cent to 312.5 billion euros, which should grow to 334.0 billion euros by 2019. Tax revenues are expected to rise over the same period, so the government does not foresee the need to issue any new debt.

Alongside investment in infrastructure and internet expansion, the government plans to raise significantly its spending on foreign aid and has budgeted 8.3 billion euros for this in the period 2016-2019.

After the Islamist attack on French satirical newspaper Charlie Hebdo in January, the government also plans to give more money to security agencies and top up funds to modernise the army, the sources said, without specifying the amount.

REUTERS