German government heeds call to increase spending

AP News
Posted: Nov 06, 2014 12:36 PM
German government heeds call to increase spending

BERLIN (AP) — The German government announced Thursday that it plans to increase spending in a sign that it is giving in to critics who have called for Europe's biggest economy to do more to spur growth.

Wolfgang Schaeuble, the country's finance minister, said he would top up the budget by 10 billion euros ($12.5 billion) from 2016, but insisted he could do so without new borrowing.

The announcement came amid warnings that Germany's gross domestic product could increase by just 1.2 percent in real terms this year. Following an economic contraction of 0.2 percent in the April-June period, analysts say Germany needs to post a strong rebound in September to avoid another drop in the third quarter, which would technically put Europe's largest economy in a recession.

The Finance Ministry said it expects tax revenues for the period from 2016 to 2018 to be 21 billion euros lower than a previous estimate in May.

Meanwhile, German factory orders rose only slightly in September, failing to make up for a sharp drop the month before as had been hoped.

The Federal Statistical Office said Thursday that orders rose 0.8 percent over August, following a revised 4.2 percent drop that month over July, according to figures adjusted for seasonal and calendar factors.

Foreign orders rose 3.7 percent, helping offset a 2.8 percent drop in domestic orders.