MR THEO Waigel, the Bonn finance minister, yesterday signalled that Germany's 1998 federal budget would involve real cuts in nearly all departmental spending plans. The budgets of some ministers would decline in cash terms.
The minister pledged to limit next year's federal deficit to DM58bn (£33.7bn), DM2bn more than outlined in earlier plans inspite of an extra burden of DM30bn caused by high unemployment and lower than expected tax revenues.
The budget, due to be agreed by the cabinet on July 11th, would then conform with Germany's constitution, which specifies that new borrowing should not exceed the amount spent on investments.
Mr Waigel was speaking at a meeting of the financial planning council, which seeks to co ordinate the budget plans of the federal, state and local authorities. He promised additional cuts in non investment spending and greater efforts to privatise in 1998 to limit federal borrowings.
Mr Waigel's warning of spending cuts came before negotiations with spending ministers to pare their outlays. Today he meets Mr Volker Rube, the defence minister, who is fighting for funds for Germany's large conscript army and the new Eurofighter combat aircraft.
The government's financial policies came under strong attack from the opposition Social Democrat party. Mr Rudolf Scharping, SPD leader in the Bundestag, the lower house of parliament, announced the SPD would file a complaint against the government in the constitutional court.
It will claim the 1996 federal budget was illegal because last year's borrowings of DM78.3bn were higher than planned, and exceeded federal investments of DM63bn. Mr Karl Diller, the SPD budget spokesman in the Bundestag, said the federal deficit in the five months to the end of May had already reached DM53.4bn and therefore exceeded the DM53.3bn total approved in the 1997 budget.
In the financial planning council, the SPD controlled Lander, which form a majority of the federal states, warned it was uncertain whether Germany's public finances could be returned to strength on a sustainable basis.
The SPD states said excessive public deficits and a further increase in Germany's overall debt level were to be feared in 1997 and 1998 after last year's deficit of 3.8 per cent of gross domestic product.
