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German Chancellor Merkel defends reform course in budget debate

German Chancellor Merkel defends reform course in budget debate

German Chancellor Angela Merkel defended her economic reform course on Wednesday, telling lawmakers that changes made now would pay dividends in years to come.
"We must not take out a loan on our future," she told parliament's lower house, where the 2007 budget was being debated through Friday
"We will continue with this (fiscal) consolidation course. We will be successful with it," Merkel said.
Finance Minister Peer Steinbrueck said Tuesday that Germany's 2006 budget deficit is likely to come in below the EU-mandated ceiling of 3 percent for the first time in years. He forecast a shortfall of 2.8 percent of gross domestic product.
The government expects the deficit to shrink further in 2007, partly thanks to a 3 percentage-point hike in value-added tax starting Jan. 1, he said.
Some have suggested the VAT hike to 19 percent may produce more revenue than needed, but Merkel defended the proposal.
"Let us have the money first, then let us talk about deficit reduction, then let us talk about whether we have any room to play," she said.
The 2007 budget plan pencils in spending of euro267.6 billion, up 2.3 percent from the euro261.6 billion planned for 2006. New net borrowing should reach euro22 billion, more than half the euro38.2 billion in the government's budget draft for this year.
In an interview with Die Zeit newspaper, released to the AP on Wednesday ahead of publication, Merkel also suggested a future increase in military spending may be necessary.
Germany has been increasingly active in military missions abroad, including in Africa, Afghanistan and the Balkans.
"A German government cannot now say: In the next decade, please no new conflicts because we can't afford it," the newspaper quoted her as saying.
She pointed out that Germany's defense spending is only 1.4 percent of GDP.
"With that we're behind Finland, Norway and Holland, whose spending is 1.7 percent. In Italy it is 1.8 percent, in France 2.5 percent, in Great Britain 2.3 percent and in the U.S.A. 3.8 percent," Merkel said.
"It's not about overtaking anyone. One just should not be permitted to say that the defense spending for the next 20 years is sacrosanct. But it's not a topic for the 2007-2008 budget either."


Updated : 2021-10-26 14:52 GMT+08:00