Germany Will Struggle To Meet Budget Targets

by Ulrika Lomas, Tax-News.com, Brussels

05 May 2004

German Finance Minister Hans Eichel has dismissed speculation that the government is to loosen its budgetary belt in order to stimulate economic growth, although tax revenues in April were much improved on the previous two months.

"In March things were bad, in January, February things were good and in April it seems things will have been better again. So let's wait for the tax estimates that are due in 10 days," Eichel told reporters.

The Schroeder administration continues to walk a fine line between fiscal restraint to appease the EU and more expansionary measures aimed at fostering growth.

However, Eichel conceded that a prolonged rate of sluggish economic growth is likely to hamper the chances of budget targets being met over the next couple of years, admitting that the country’s tax revenues for 2005 may be “significantly lower” than envisaged by the government.

Indeed, reports citing claims from economic experts suggest that the tax take will fall EUR10 billion lower than forecast this year.

Finance Ministry insiders have also indicated that the poorly performing tax amnesty will contribute to a EUR18 billion shortfall in the federal budget next year.

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