Germany to Boost 2010 Bond Sales in ‘Worst’ Budget Since WWII
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By Brian Parkin
Dec. 13 (Bloomberg) -- Germany plans to sell a record amount of debt next year as weak tax revenue coupled with rising unemployment costs create what a government official said is the bleakest budget outlook since World War II.
Gross federal bond sales will rise to between 330 billion euros ($482 billion) and 350 billion euros in 2010 compared with about 329 billion euros this year, reflecting the lagging effect of the recession, said Deputy Finance Minister Steffen Kampeter.
“What we’re looking at frankly is the worst budget situation since the war,” Kampeter, a member of Chancellor Angela Merkel’s Christian Democratic Union, said in a WDR radio interview broadcast today. “The bill for unemployment and health costs, legacies of the crisis, will hit us with full force in 2010 before ebbing in 2011.”
Merkel’s draft budget, to be published on Dec. 16, will show net federal borrowing surging to 86 billion euros next year from 37 billion euros in 2009, government documents show. The difference comprises 23 billion euros in extra unemployment benefits, 10 billion euros in topping up the compulsory health- care program and a drop in tax revenue.
“The dramatic increase” in borrowing from this year to next “is a mirror of the financial and economic crisis,” the budget report distributed to reporters in Berlin shows.
Finance Minister Wolfgang Schaeuble said on Dec. 10 that Germany’s public-sector deficit at federal, state and municipal levels will grow to 6 percent of gross domestic product next year, the biggest since the inception of the euro in 1999. The deficit this year will be 3 percent, the European Union limit set to protect the single currency.
Soffin Fund
While the budget will show a precise gross borrowing target for 2010 when published on Dec. 16, the actual sales calendars, published quarterly, may show variance if lenders tap the Soffin bank-rescue fund, the officials said.
By Dec. 9, banks were supplied about 148 billion euros in aid from the 500 billion-euro fund this year, Soffin said. The less-than-anticipated aid helped the government cut planned bond sales in the fourth quarter by 22 percent to 59 billion euros.
Germany initially planned to issue a record 346 billion euros of debt this year, a 57 percent increase from 220 billion euros in 2008. The fourth-quarter reduction will lower this year’s total to 329 billion euros, still a record.
The Frankfurt-based Federal Finance Agency will release its provisional 2010 calendar of debt sales on Dec. 15 or Dec. 16 to coincide with the publication of the budget.
To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net.
Last Updated: December 13, 2009 10:00 EST
