Germany’s government plans to spend EUR325.5 billion ($363.8 billion) in 2017, an increase of 2.7% from this year’s target of EUR316.9 billion.
Berlin warned that to keep its books balanced in 2018, the government will have to cut spending in other areas by EUR6.7 billion to compensate in part for costs associated with the influx of roughly 1 million migrants, mostly from the Middle East. The government has budgeted roughly EUR10 billion for the cost of absorbing migrants next year, up from EUR8 billion this year.
“We are keeping our word and staying faithful to our solid fiscal policy, despite a difficult environment,” said German Finance Minister Wolfgang Schäuble.
“We are investing in infrastructure, education and research. We’re doing what’s necessary to ensure internal and external security. And we are helping refugees, all without taking up new debt.”
Strains in Germany’s finances were visible, despite Mr. Schäuble’s reassuring comments.
Rising social welfare costs are set to swallow a record 55.8% of overall spending in 2017, with welfare spending, including pensions and unemployment benefits, budgeted to rise to 57.3% of total expenditure in 2020.
The modest rise in German government spending coincides with a deteriorating economic outlook among some of Germany’s most important trading partners, with growth slowing in China, and other major emerging-market economies like Brazil and Russia contracting.
The terrorist attacks in Brussels on Tuesday, coming only months after the Nov. 13 atrocity in Paris, are casting a shadow over European business while violent conflict continues in parts of North Africa and the Middle East.
The government’s top economic advisers, known as the “wise men,” lowered their economic growth forecast for Germany this year to 1.5% from a previous estimate of 1.6%, citing “a weaker external environment.” For 2017, they forecast growth of 1.6%.
Despite the gloomier outlook for exports, growth in domestic consumer spending should underpin Germany’s growth, helped by a buoyant labor market, expansive fiscal policy and the European Central Bank’s “extremely loose” monetary policy, the economists said.
Such a view squares with signs of improving business confidence in March, according to Germany’s Ifo Institute and a survey of eurozone purchasing managers on Tuesday.
The hundreds and thousands of migrants seeking asylum in Germany will likely leave their mark on official employment statistics only with a delay, the economists said.
“Bottlenecks in the asylum procedures currently lead to significant delays in integrating them into the jobs market,” the economists said in their semi-annual report published on Wednesday.
About 360,000 migrants eligible to live and work in Germany will have entered the jobs market by the end of 2017. Of those, about 250,000 migrant workers will be out of work, while about 110,000 will have found a job, probably a less skilled one, the economists said. “The majority will be unemployed at first,” they said.
Germany’s jobless rate could rise to 6.7% in 2017 from 6.4% in 2015, while the number of unemployed people in Germany would rise to almost 3 million, according to the economists.
Source: Hellenic Shipping News