Germany's cabinet will adopt a draft 2005 budget tomorrow that has no margin to cope with any further setbacks to growth or tax revenues, a finance ministry source said today.
He said the economy would have continue on its current path or the euro zone's largest economy would again have problems keeping its deficit within the 3 per cent of gross domestic product ceiling dictated by European Union rules.
"It's a very, very tight budget," he said. "The economy has to develop as it is doing so now otherwise we will have difficulties with the 3 per cent," he added.
"And if the tax estimates in the autumn are bad then we will have big problems. It's certainly a budget that has no reserves," he said.
The budget foresees spending of €258.3 billion, a rise of 0.4 per cent from the €257.4 billion planned this year, although it remains to be seen if 2004 spending can be kept on track.
The source said the government would certainly have to adopt a supplementary 2004 budget in the autumn to fill an unexpected gap between spending and revenues of at least €10 billion.
The source was speaking shortly after the German Finance Agency said the government would borrow €5 billion more than planned in the third quarter of this year to help plug its deficit by tapping an outstanding 30-year bond issue.