German Budget Surplus Continues to Widen

A report released Thursday showed that a new estimate of German tax receipts through 2021 will be about $60 billion higher than previously thought. That figure was compiled by about thirty different experts from around the country.

Germany has virtually stood alone among Euro-zone countries in avoiding financial difficulties. If anything, criticism of the country has come because of perceived underspending rather than overspending. Last year was Germany’s third consecutive budget surplus at 0.8% of GDP.

The German legacy of hyperinflation and economic instability has instilled a cautiousness in Germany that can be seen in high German savings rates, both by the government and households. Various international organizations have called on increased German spending as a means of avoiding economic weakness across the entire Eurozone. In addition to budget surpluses, Germany enjoys enormous current account surpluses which are currently reaching about 8% of GDP.

The German budget surplus / deficit over the previous ten years compared to France and the UK.

If the surpluses are a problem, they’re a problem most countries around the world would love to have. German Finance Minister Wolfang Schauble indicated support for tax cuts as well as a continued reduction in German government debt as the best uses of the on-going surplus. He projected that German government debt will near 60% of GDP by the end of next year. That compares to more than 100% in the United States and about 96% in France.

While Schauble, a part of Merkel’s government, advocates tax cuts, the liberal opposition in the form of the Social Democratic Party has called for infrastructure spending as well as funds for educational programs. The divide between the two parties is certain to be a key issue for voters in the next Parliamentary elections.

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