Germany sticks to debt target despite boom: finance minister

Sat Aug 14, 2010 9:08am EDT
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BERLIN (Reuters) - Germany will stick to its target to borrow about 65 billion euros ($83.19 billion) this year despite record economic growth and billions in extra tax revenue, the country's finance ministry said on Saturday.

"The ministry continues to expect that new debt of around 65 billion euros will be necessary this year," a finance ministry spokesman said.

Germany's economy -- Europe's largest -- grew at its fastest rate since reunification in the second quarter, data showed on Friday, as companies stepped up investment and exports surged, in the latest evidence the recovery has shifted up a gear.

Gross domestic product grew by 2.2 percent on the quarter, beating all projections in a Reuters poll of 34 economists and prompting some to expect full-year growth above 3 percent.

Following the numbers, Germany's Institute for World Economy (IfW) think tank expected about 11 billion euros in extra tax revenues this year and about 15 billion next year, according to a report in the Rheinische Post newspaper.

In May, the finance ministry said it expected tax revenues of 510 billion euros this year and 515 billion next year.

Chancellor Angela Merkel's government plans to slash public spending, a drive reinforced by the economic boom, despite calls from opposition and from within her coalition to relax the austerity plans now.

"The decisions made in the austerity package remain in place," the spokesman said.

Deputy finance minister Werner Gatzer told Reuters in July that net new debt was unlikely to fall below the planned 65 billion euros. The government initially expected 80 billion euros in new debt.

(Reporting by Gernot Heller, writing by Annika Breidthardt; editing by Sue Thomas)