Berlin: Germany cut 2011 borrowing to 17.3 billion euros

Jan 12, 2012, 18:47 GMT

Berlin - Germany cut its net new borrowing last year to 17.3 billion euros (22.1 billion dollars) thanks to strong tax revenues, officials said Thursday.

But Chancellor Angela Merkel's government plans to increase borrowing this year even while it preaches austerity to fellow eurozone.

The Finance Ministry's 2011 estimate came in well below the originally budgeted 48.4 billion euros. Strong growth and employment meant the government received more taxes last year than it expected.

The ministry foresees the current year's borrowing at 26.1 billion euros, though it seems probable this will rise given German commitments to the new eurozone bailout fund and signs that the economy is slowing down.

This year's figure namely does not include a sizeable sum in borrowed capital to launch the European Stability Mechanism (ESM) in July.

Analysts said Germany may double its planned first installment of 4.3 billion euros to give the ESM a flying start.

There is one saving grace for Berlin. Germany is paying ultra-low interest on new federal bonds. Last week it even scored a negative rate on a six-month issue.

Last year's total federal, state and local government deficit of 1.0 per cent of GDP, or 26.7 billion euros, is also the first in three years to meet eurozone requirements that set a ceiling of 3.0 per cent on net new public-sector borrowing.