Germany has moved one step closer to regaining its economic strength of old after posting its first real budget surplus since 1989, the year the Berlin Wall fell.
Following a short post-unification boom and a longer economic bust, yesterday's news of a surplus of €1.2 billion in the six months to June was welcomed in Berlin and elsewhere in Europe.
"The budget had always recorded a deficit since the German reunification in 1989 - except in the second half of 2000 due to the high [ one-off] revenues from the auction of third generation mobile phone licences," the Federal Statistics Office said in a statement yesterday.
German finance minister Peer Steinbrück warned his political colleagues not to even think about calling for tax cuts or other fiscal giveaways in light of the budget news. "Whoever demands tax cuts at this point without blushing is continuing the politics that have created Germany's debt mountain of €1.5 trillion," said Mr Steinbrück.
Next year he will have to borrow €12.9 billion to balance the books, although he hopes to present a balanced, debt-free budget by 2011.
The finance minister received backing for his position from within the government and from economic experts. "If new debt can be reduced to zero and the budget surplus used to reduce existing debt - only then should there be tax and social contribution cuts," said Dr Wolfgang Wiegard, senior economics professor at the University of Regensburg and a member of Germany's Council of Economic Experts.
Experts were full of rare praise for the government's tight hold on the fiscal reins, and for bringing about a budget surplus for only the third time after 1973 and 1989.
However, many economic observers fear the government will now give in to temptation to loosen those reins during a two-day cabinet meeting which began yesterday in a state guesthouse near Berlin.
Costly items on the agenda include subsidies for greenhouse gas reduction programmes, cutting employee contributions and greater spending on childcare and eduction.
This concern was echoed yesterday in Brussels, where Germany clashed with EU colleagues for breaching euro-zone fiscal guidelines from 2003-2005. A European Commission spokesman warned that the budget news "should not lead the the German government, or any other government, to relax its efforts.
"Instead, they should consolidate the public finances, put them firmly on safer ground in order to take good advantage of the current economic growth . . . [ to] reduce public debt," the commission spokesman said.
