Germany to restrict borrowing

Source: Agencies  |   2009-6-13  |     NEWSPAPER EDITION

GERMANY'S parliament gave its final approval yesterday to a bill restricting the country's new borrowing in the future, as deficits have ballooned with costly financial bailouts and stimulus measures.

The upper house of parliament approved restricting annual increases in the federal budget deficit to, at most, 0.35 percent of gross domestic product from 2016. The bill, passed by the lower house of parliament in May, also gradually restricts how much new borrowing the country's 16 states are allowed, down to zero by 2020 - meaning they will not be allowed deficits of any kind from then.

The new measure does allow for the limits to be set aside, however, in "emergency situations," such as natural catastrophes and during recessions.

Germany's budget deficit is expected to reach 3.9 percent of gross domestic product in 2009.

The European Union has said it expects it to grow to 5.9 percent in 2010 - almost double the 3 percent ceiling of EU budget rules that underpin the stability of the euro.