Not in her house

21 November 2012 By Olaf Storbeck

Europe’s austerity grand priestess seems to have forgotten domestic fiscal prudence as she braces for a tough political fight next year. She is spending freely on pet projects that voters might like. Germany does need more public spending, but not that type.

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The German parliament will decide on the 2013 budget this week. New debt is supposed to be 17.1 billion euros while total expenditures amount to 302 billion euros.
In 2013, the coalition will introduce a new subsidy for parents. For up to two years, the state will pay 100 euros per month to parents who don’t work but care for their babies at home. In 2014, the monthly payment will rise to 150 euros. This “nurture benefit” is estimated to cost 1.2 to 1.4 billion euros annually.
The government also decided to make public health care cheaper. Starting in January, patients visiting a doctor will not have to pay a quarterly fee of ten euros anymore. This will drive up public healthcare expenditures by 2 billion euros per year.
The road building budget will rise by 750 million euros.
Additionally, the coalition is keen on introducing a top-up benefit for poor pensioners. With some strings attached, the minimum floor of pensions is planned to rise from 688 to 850 euros. The initial costs are relatively low (about 50 million euros per year) but the burden is estimated to rise to 3.2 billion euros per year in 2030.
The German council of economic advisers as well as the Federal Audit Office recently severely criticised the budgetary trajectory. According to the council of economic advisers, the good economic climate in Germany temporarily drives up tax revenues and lowers social security expenditures while the government is bent on structurally increasing spending.

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