German budget surplus soars as economy motors ahead | Reuters |

Germany’s economy is in full swing, the government said on Thursday, a state of affairs that also led to a record 2016 budget surplus likely to irritate much of the rest of the European Union and play directly into election politics.

Germany’s overflowing coffers are the subject of intense debate ahead of the Sept. 24 federal election, with the Social Democrats promising more investment and Chancellor Angela Merkel‘s conservatives a mix of investment, tax cuts and debt reduction.

Merkel played down the size of the federal government’s portion of the surplus, which will go into a fund for refugee-related expenditure following the influx of people, many fleeing war, over the past few years.

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“If you look at the federal level alone, the surplus is rather small,” Merkel said during a joint news conference with Lithuanian Prime Minister Saulius Skvernelis.

Merkel said the government would further increase spending on defense, as promised to NATO allies, as well as on domestic security and social improvements.

“At the same time, we don’t want to take on new debt. So the room for maneuver is rather limited,” Merkel added.

The finance ministry, meanwhile, said the economy – dominated by exports – has kicked off the year in fine form.

“The German economy is on a solid growth path,” its monthly report said, adding that indicators signaled a continuation of the economic upswing in 2017.

“Consumption will probably remain an important driver of economic growth,” the ministry said, pointing to job creation, pay hikes, low interest rates and moderate, albeit rising energy prices.


But it is the budget surplus – reported by the Federal Statistics Office – that may raise most eyebrows.

Germany has been running a surplus for three years. Soaring tax revenues, rising employment and low debt costs helped drive the gap higher to 23.7 billion euros ($25 billion) in 2016.

That is the highest since Germany reunified in 1990, and creates a fiscal buffer at a time when authorities are working to house and integrate hundreds of thousands of refugees.  

Germany’s Growth, Budget Surplus Soar | FSM |

As Germany Spends On Its Migrants, The Country Posted Economic Progress As Their Budget Surplus Further Increases.

Germany notched a record budget surplus in 2016, aided by growing tax revenues and employment and low debt expenses. In turn, this created conditions for robust economic growth this year supported by higher state and household spending.

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Budget surplus

With the surplus, it has generated a massive fiscal buffer at a period when authorities are working to house and integrate thousands of immigrants. A separate Statistics data report revealed higher state spending was a key player in bolstering economic growth to 1.9% in 2016.

Under the country’s budget law, the federal government’s surplus of €7.7 billion will go into a fund for refugee-related expenses.

U.S. GDP data below expectations, brought full-year growth for 2016 to 1.6%

Germany is hailed as Europe’s largest economy, which ranks fourth globally in nominal gross domestic product (GDP) figures, and fifth in purchasing power parity (PPP) GDP. Britain comes next in the European economic rankings, followed by France and Italy.

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PS In my analysis, Chancellor Merkel made a wrong decision to run again as partyleader of CDU/CSU in the upcoming election in September!

Germany with  SPD leader Martin Schulz for a strong pro Europe stance

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