Economy

German Finance Minister Schaeuble: Economy improving but needs consolidation

Wolfgang Schaeuble

Wolfgang Schaeuble

German Finance Minister Wolfgang Schaeuble said on Thursday that while the country’s economic conditions have improved, consolidation efforts must continue to sustain the recovery.

“Overall economic conditions in Germany are still favorable, tax receipts are rising moderately,” Schaeuble said, according to The Wall Street Journal. “But in the light of German and European fiscal rules, as well as the existing debt levels, the financial leeway remains limited.”

In a recent meeting, Germany’s state finance ministers called on Bremen—one of the country’s most indebted states—to improve its debt-reduction efforts and introduce new measures in the spring.

The coalition between Chancellor Angela Merkel’s conservative parties and Social Democrats has pledged $31.26 billion towards extra spending over the next four years on education and infrastructure, The Wall Street Journall reports.

The coalition promised to fund the extra costs without adding to its debt or raising taxes by using the $20.5 billion originally earmarked for debt redemption, while the rest will come from higher tax revenue resulting from stronger economic growth and lower interest rate payments.

Germany’s finance ministry expects overall debt to decline faster than originally forecast, reaching 76 percent of GDP in 2014 from 79 percent this year, before falling to 73 percent in 2015. Germany’s debt is expected to decline further to 70.5 percent of GDP in 2016, before falling to 67.5 percent in 2017, according to The Wall Street Journal.

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