Germany to raise spending until end of decade thanks to balanced budget - government sources

The German government plans to boost spending every year until 2019 despite refraining from net new borrowing as Europe's largest economy rides high on a tide of surging tax revenues, government officials said on Friday. The officials, who briefed reporters on condition that they would not be named, said that even a Greek default would not affect plans to keep the federal budget in the black every year to 2019. Chancellor Angela Merkel's government achieved a balanced budget for the first time since 1969 last year -- one year ahead of schedule and at a time when Germany is under international pressure to boost global growth by raising investment in items like infrastructure. At the same time as it avoids undertaking net new borrowing, the government plans to raise spending in 2016 by 3.4 percent on the year to 312.0 billion euros and also intends to hike spending by more than 2 percent every year after that up until 2019, the officials said. A surging tax take will help, with the government expecting revenues to climb to every year up until 2019, they added. The government's coffers have been boosted as German workers benefit from high employment and strong wage hikes. In May, Germany raised its tax revenue estimates for this year by about 1 percent. In a sign of the strength of tax revenues, the finance agency said earlier this week that Germany would issue 5 billion euros less debt in the third quarter than originally planned. The German cabinet is due to pass the draft law of the 2016 budget and the financial plan for the period up until 2019 next week. Higher German spending will no doubt be welcome news for Germany's euro zone partners in particular, which have been calling for the country to pour more money into investment to spur the euro zone economy. The extra spending will be used for items including an extra 10-billion-euro investment programme between 2016 and 2018 -- as announced in November -- and to boost development spending by 8.3 billion euros between 2016 and 2019, the officials said. They also said the government would ease the tax burden by a volume of more than 5 billion euros. They said refraining from net new borrowing would help Germany reduce its general government debt ratio to below 60 percent of gross domestic product (GDP) within 10 years from 74.7 percent in 2014.