(Reuters) - German Finance Minister Wolfgang Schaeuble announced 10 billion euros in additional public investments on Thursday but said Berlin would only splash out more money once it had achieved its goal of balancing the federal budget next year.
Germany is under intense pressure from some of its European partners to spend more to boost the bloc's stalling economy, but it has stuck doggedly to a budget goal that Chancellor Angela Merkel's "grand coalition" unveiled one year ago, when the growth outlook was much rosier.
Europe's largest economy contracted in the second quarter of the year and is projected to barely expand in the second half of 2014, removing a key pillar of growth for the struggling euro zone.
German industry orders data for September, released earlier on Thursday, had been expected to bounce back sharply from a steep fall in August, but rose by a disappointing 0.8 percent, heightening concerns about the health of the economy.
Geopolitical crises in Ukraine and the Middle East have unsettled German firms, which are themselves holding off on investments. The latest blow has come from a record-long four-day strike by German rail workers, which has paralysed passenger and freight transport across the country.
"As long as the political risks don't worsen, we can stay on the growth path despite recent weakening," Schaeuble said as he announced new tax estimates.
Despite cutting the expected tax take for 2015 by 6.4 billion euros, Schaeuble said Germany was on track for the balanced budget goal that is seen as a "holy grail" by both sides in the right-left coalition government.
The 10 billion euros in additional investments falls far short of what leading economists and mayors of German cities say is needed to upgrade public infrastructure and will disappoint those, including the International Monetary Fund (IMF) and European Central Bank (ECB), who have been calling on Berlin to spend more.
"FISCAL SPACE"
"There are a few countries that have the fiscal space to increase their public investments at the moment.
One country, also the largest economy, has that possibility and I hope that they will," Jeroen Djisselbloem, who chairs meetings of euro zone finance ministers and is considered an ally of Germany, told a conference in Brussels on Thursday.
A group of German mayors said this week that 118 billion euros of investment was needed in roads and buildings, while another public committee has called for investments of 7.2 billion euros a year to fix public transport infrastructure.
The DIW economic think-tank in Berlin estimates Germany needs 80 billion euros in additional public and private investment per year to close a gap with peers. Schaeuble's 10 billion euros wouldn't begin to flow until 2016, far too late to counter the current economic woes.
"It's ridiculous," said Anto Hofreiter, parliamentary floor co-leader of the opposition Greens, referring to the sum. Ulrich Grillo, president of the BDI federation of German industries, said: "It's the right thing to do when the state is looking to use whatever room for manoeuvre that it has to boost investment spending."
reuters.com
Germany is under intense pressure from some of its European partners to spend more to boost the bloc's stalling economy, but it has stuck doggedly to a budget goal that Chancellor Angela Merkel's "grand coalition" unveiled one year ago, when the growth outlook was much rosier.
Europe's largest economy contracted in the second quarter of the year and is projected to barely expand in the second half of 2014, removing a key pillar of growth for the struggling euro zone.
German industry orders data for September, released earlier on Thursday, had been expected to bounce back sharply from a steep fall in August, but rose by a disappointing 0.8 percent, heightening concerns about the health of the economy.
Geopolitical crises in Ukraine and the Middle East have unsettled German firms, which are themselves holding off on investments. The latest blow has come from a record-long four-day strike by German rail workers, which has paralysed passenger and freight transport across the country.
"As long as the political risks don't worsen, we can stay on the growth path despite recent weakening," Schaeuble said as he announced new tax estimates.
Despite cutting the expected tax take for 2015 by 6.4 billion euros, Schaeuble said Germany was on track for the balanced budget goal that is seen as a "holy grail" by both sides in the right-left coalition government.
The 10 billion euros in additional investments falls far short of what leading economists and mayors of German cities say is needed to upgrade public infrastructure and will disappoint those, including the International Monetary Fund (IMF) and European Central Bank (ECB), who have been calling on Berlin to spend more.
"FISCAL SPACE"
"There are a few countries that have the fiscal space to increase their public investments at the moment.
One country, also the largest economy, has that possibility and I hope that they will," Jeroen Djisselbloem, who chairs meetings of euro zone finance ministers and is considered an ally of Germany, told a conference in Brussels on Thursday.
A group of German mayors said this week that 118 billion euros of investment was needed in roads and buildings, while another public committee has called for investments of 7.2 billion euros a year to fix public transport infrastructure.
The DIW economic think-tank in Berlin estimates Germany needs 80 billion euros in additional public and private investment per year to close a gap with peers. Schaeuble's 10 billion euros wouldn't begin to flow until 2016, far too late to counter the current economic woes.
"It's ridiculous," said Anto Hofreiter, parliamentary floor co-leader of the opposition Greens, referring to the sum. Ulrich Grillo, president of the BDI federation of German industries, said: "It's the right thing to do when the state is looking to use whatever room for manoeuvre that it has to boost investment spending."
reuters.com
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