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Germany Details Austerity Plan

07 June 2010 21:32 (UTC +04:00)

Baku â€“ APA. The German government Monday announced â‚¬81.6 billion ($97.64 billion) in combined austerity measures from 2011 through to 2014 in a bid to comply with constitutional requirements and ease concern about the debt situation in the European Union, APA reports quoting â€œThe Wall Street Journalâ€.
The measures to be implemented start with â‚¬11.2 billion in 2011, followed by â‚¬19.1 billion in 2012, â‚¬24.7 billion in 2013 and â‚¬26.6 billion in 2014.
"Around â‚¬80 billion must be saved until 2014 in order to put our financial future on a solid footing," Chancellor Angela Merkel told reporters. Germany faces "serious, difficult times" but the measures "are necessary for the future of our country," she added.
Vice-chancellor and Foreign Minister Guido Westerwelle said the measures aim to cut spending and don’t include any increases in income tax or value-added tax.
The axe will fall on social welfare and unemployment benefits, among others. A duty on utility companies with nuclear power plants may also be imposed, along with a tax on air passengers.
Dropped were plans to reconstruct a Prussian-era palace in central Berlin that was destroyed during World War II.
The U-turn from fiscal expansive to austerity policy comes as the government is obliged to reduce its structural deficit, adjusted for cyclical effects, so that it represents no more than 0.35% of GDP by 2016, making necessary an annual reduction of the deficit of about â‚¬10 billion from 2011. It also comes amid concern over debt levels in the euro zone, which has helped push down the euro.
Germany’s budget deficit reached 3.1% of gross domestic product in 2009 and the government forecasts a deficit of about 5% this year. Adjusted for economic swings, the structural deficit is about 3% of GDP this year.
With Germany’s new debt requirement this year likely to come in lower than the â‚¬80.2 billion penciled into the 2010 budget, the government’s structural deficit will also be lower. Still the government’s has pledged that austerity efforts in 2011 will be "higher than strictly necessary."