Germany has abandoned a target of bringing its 2004 budget deficit below the three per cent of gross domestic product maximum allowed under European Union budget rules, a newspaper reported today.
The Financial Times Deutschlandsaid Chancellor Gerhard Schroeder and Finance Minister Hans Eichel had met yesterday and agreed that they could only save in ways which would not cramp economic growth, meaning they will focus on cuts to subsidies.
The official line of the finance ministry is to be that Mr Eichel has not said that Europe's largest economy will stick to the three per cent budget rule under any circumstances.
No one was immediately available for comment at the ministry but a German opposition Christian Democrat member of parliament said Mr Eichel told deputies at a behind-closed-doors meeting this morning that meeting the EU limit would require a big effort.
Another German economic daily, Handelsblatt, said Mr Eichel sought Mr Schroeder's approval for a range of cost-cutting measures during their meeting yesterday evening.
Germany's 2002 deficit hit 3.6 per cent of GDP, breaking the EU limit and earning Berlin a rebuke from Brussels. Germany is expected to break the three per cent ceiling again this year.
Handelsblattsaid Eichel had been looking to cut new borrowing next year to euro23 billion from this year's expected level of euro35-40 billion.
This would involve savings of euro15 billion and increased tax or privatisation revenues.
The federal budget accounted for around half of Germany's total public sector deficit in 2002.