Budget Proposal

The proposed 2009 budget includes a modest 1.8 percent spending increase over this year. Germany's Finance Minister Peer Steinbrueck has been eager to keep new spending down in a bid to cut back on borrowing.

Yet Steinbrueck and other cabinet members largely avoided proposing painful budget cuts that could put them on the defensive ahead of national elections which will likely be held in September 2009.

Looking towards the next elections

The budget was criticized by the three main opposition parties, which have derisively referred to it as "campaign budget."

"This is a budget that will at best hold up until the upcoming federal elections next fall," said the Green party's budget expert, Alexander Bonde.

Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) and Social Democratic Union (SPD) are in the uncomfortable position of being coalition partners and political rivals going into the 2009 electoral campaign. The political posturing has led to high-level fights over how spending will be allocated.

The Green party has also warned that the CDU wants to save money at the expense of employment and social programs.

With unemployment falling, it might be time to look at whether it's possible to save money in the labor ministry, CDU leader Michael Meister said in a radio interview. The 123.5 billion-euro budget for the ministry represents a slight decrease over the 2008 level.

Germany eyes balanced budget

The 2009 budget forsees decreasing net borrowing down by 1.4 billion euros to 10.5 billion in 2009, with new borrowing set to decline sharply in 2010 to 6 billion euros. The plan calls for Germany to have a balanced budget for the first time in the last 40 years by 2011.

Germany's federal debts total 1.55 trillion euros, a sum which Steinbrueck acknowledged is "unimaginable" for normal citizens. It amounts to a new car for every one of Germany's 82 million citizens, from baby to pensioner.

The Free Democratic Party (FDP), a free-market liberal party, criticized Steinbrueck for not making deep enough cuts to spending. Budget cuts are needed to decrease the budget deficit, FDP's budget expert Juergen Koppelin told the Berliner Zeitung newspaper.

"A government that has received 60 billion euros more in taxes since it started, but has reduced the new debt by only 20 billion euros has not pursued a responsible budget policy," Koppelin said.

Cautious economic outlook

In an interview with ZDF national public television, Steinbrueck said the budget agreement was an important sign of the coalition cabinet's "competence, assertiveness and capability to act."

Steinbrueck told ZDF that the budget includes not only savings measures but also provides funds to invest in education and research and development.

He acknowledged that Germany's current economic situation was favorable, but said his conservative long-term calculations took into account the probable slowing of economic activity.

Debate over the proposed budget will begin in September and will be decided by the end of November 2008.