Mr Hans Eichel, the German finance minister, yesterday conceded that a large question mark was hanging over next year's budget, admitting the 2 per cent growth forecast was "uncertain".
His statement to the Bundestag, initiating four days of debate about the government's fiscal plans for 2004, was the closest he has come to confessing Germany might breach the deficit ceiling of 3 per cent of GDP imposed on euro-zone countries by the Stability and Growth Pact.
"This is the fifth budget I have drafted so far as finance minister, and it is indeed the most burdened with risks," Mr Eichel said. "We have not abandoned our growth target, but it will be difficult to reach."
The chorus of critics against Mr Eichel's budget and the rosy assumptions underpinning it has been growing louder since the end of the summer break, including within the ruling coalition of Social Democrats and Greens.
Ms Christine Scheel, the Green parliamentary group's public finance expert, said yesterday that most indicators suggested the 2 per cent growth target would not be reached next year.
In a violent attack on the finance minister, Mr Friedrich Merz, deputy head of the Christian Democratic group, said the budget was "not fit for discussion", not least because of its upbeat growth assumption. "You have failed politically, professionally, and personally," he told Mr Eichel.
While most private sector economists are optimistic about an economic rebound in Germany next year, they project growth of just 1.5 per cent on average, following flat growth this year.
"The main risk is that government and opposition fail to agree on the coalition's structural reform plans, that would be a major blow," said Mr Dirk Schumacher, economist at Goldman Sachs in Frankfurt. Analysts believe the opposition, which has hardened its stance on the reforms lately, will refrain from blocking the measures. But it could insist on changes and let the debate drag on. The budget is scheduled for approval in December.
- (Financial Times Service)
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