ZCZC
BCN-12
GERMANY-ECONOMY-FINANCE-GDP
Germany posts large public surplus amid budget debate
BERLIN, Aug 27, 2019 (BSS/AFP) – Germany on Tuesday announced a smaller but
nonetheless substantial budget surplus for the first half of 2019, amid
increasing calls for Berlin to spend more to stave off recession.
The positive figure of 45.3 billion euros ($50.3 billion) in public coffers
is down from the same period last year, when it reached 51.8 billion euros,
with a surplus of 62.4 billion euros for 2018 as a whole, federal statistics
office Destatis said.
For the past five years, Europe’s biggest economy has consistently posted
public budget surpluses. The latest figure is 2.7 percent of gross domestic
product, suggesting Chancellor Angela Merkel’s government could untie the
purse strings and boost sluggish growth.
Destatis also confirmed that Germany’s GDP declined by 0.1 percent in the
second quarter while all signals point to further shrinking in the current
quarter, spelling a technical recession.
The German economy, which is highly dependent on exports, is vulnerable to
global trading tensions, especially strife between Washington and Beijing,
and uncertainty about Britain’s exit from the European Union at the end of
October.
In seasonally adjusted figures, German exports fell by 1.3 percent from the
previous quarter, while imports were down by 0.3 percent, Destatis said.
In annual comparison, exports contracted by 0.8 percent — the first time
that has happened in six years.
– ‘Black zero’ –
With rising fears of a global downturn, Merkel’s government is facing
increasing calls, both at home and abroad, to spend more on investments or
approve tax cuts to support the economy.
Before the G7 summit in Biarritz, French President Emmanuel Macron had
mentioned Germany as among “countries that have the capacity” to stimulate
the economy and suggested this was a “profound question” for Merkel to
ponder.
MORE/SR
ZCZC
BCN-13
GERMANY-ECONOMY-FINANCE-GDP 2 LAST
Merkel also faces domestic calls to put an end to the dogma of balancing the
federal budget, known as the ‘Black Zero’.
But with key regional elections looming this weekend and next month, it
would be a gamble to ditch the policy, which is popular with voters.
For now, Merkel is refusing to question the policy, which in principle has
been set in stone until 2021, despite favourable loan financing conditions
and the need for investment in infrastructure.
The chancellor, a champion of European budgetary discipline, has argued
that Germany “cannot live sustainably beyond our means” and must be able to
finance the state pensions for an ageing population.
A fierce critic of that approach, US economist Paul Krugman recently again
criticised Germany’s “ruinous obsession over public debt.”
Even if Berlin were to decide to dip into debt, its room for manoeuvre is
limited because the country’s constitution has a ‘brake’ which limits the
annual deficit to 0.35 percent of GDP.
Commerzbank analysts have calculated that this would allow only limited
firepower, a “fiscal stimulus in 2020 of only five billion euros”.
BSS/AFP/SR/1910 HRS