Germany's cabinet yesterday approved a budget which aims to trim spending and cut borrowing to €15.5 billion in 2003, but which could be completely re-written after the country's September election.

The budget foresees spending falling half a percentage point to €246.3 billion, officials said, while tax revenues are forecast at €204.8 billion. The balance is made up of new borrowing and "other revenues", including six billion of privatisation receipts.

Mr Eichel said €5 billion would be generated from the sale of shares in former state monopolies Deutsche Telekom and Deutsche Post, probably to state bank KfW, in order to replenish a postal workers' pension fund raided to help balance 2002's books. He said the budget was in line with a commitment Germany gave its European Union partners under the bloc's Stability and Growth Pact to bring the total public sector deficit "close to balance" in 2004.

Mr Eichel repeated in a newspaper interview yesterday that the German economy needed to grow at least 2.5 per cent in 2003 and 2004, something he said was "a realistic forecast", in order for Berlin to meet the 2004 goal.

"We are not making any financial promises we can't keep and are not straying from the criteria of the Stability and Growth Pact," Chancellor Gerhard Schroeder told a news conference. Opposition conservatives dismissed the budget as built on risky assumptions about interest rates, growth and tax revenues. Mr Eckart Tuchtfeld, an economist at Commerzbank in Frankfurt, said the budget was more or less in line with expectations, but also said it contained the risks. The use of privatisation receipts from share sales smacked of "a measure of last resort".