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World

Germany faces stretched budget as COVID tears hole into public finances

  • The main reason for the overall higher tax estimate is the government's decision in April to revise upwards its forecast for gross domestic product growth to 3.5% this year.
Published May 12, 2021

BERLIN: The German government expects its tax revenues for 2021 to 2025 to come in 2 billion euros ($2.42 billion) below previous projections as the coronavirus pandemic hits federal public finances more than initially feared, a document showed on Wednesday.

For all state levels, including state governments as well as municipalities, tax revenues are seen 10 billion euros higher than projected in November, according to the document compiled by finance ministry officials and other tax experts.

The main reason for the overall higher tax estimate is the government's decision in April to revise upwards its forecast for gross domestic product growth to 3.5% this year.

Finance Minister Olaf Scholz has proposed a federal budget for next year which would see the government taking on net new debt of some 80 billion euros. This will require parliament to suspend debt limits in 2022 for the third year in a row.

Since March last year, Germany has implemented an unprecedented array of COVID-19 rescue and stimulus measures, financed with record new borrowing of 130 billion euros in 2020 and more than 240 billion euros in 2021.

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