German debt may top 2 trillion Euros by 2013

Germany’s debt may rise beyond 2 trillion euros ($2.8 trillion) by 2013, the end of the next government’s term, as borrowing surges amid the deepest economic crisis since World War II, the Finance Ministry said. The federal government, the 16 states, cities and towns plan to borrow around 509 billion euros through 2013, ministry documents published in Berlin today show. Germany’s debt will increase to 82 percent of gross domestic product from 65.9 percent last year, violating European Union rules. Hans-Juergen Hoffman, managing director of polling institute Psephos, stated in an interview: “A large part of the public is convinced that the reduction of state debt should be given a greater priority than tax cuts or tax relief.” EU rules limit national deficits to 3 percent of GDP and cap debt at 60 percent of national output. While the deficit is expected to return to 3 percent of GDP in 2013 from a high of 6 percent next year, debt is forecast to break the Stability and Growth Pact’s ceiling during the entire planning period. The revised pact grants leeway in times of economic crisis. Bank bailouts and recession-fighting measures will raise advanced economies’ debt to at least 114 percent of GDP in 2014, the International Monetary Fund forecasts. That compares with debt of 78 percent of GDP in 2006, the year before the financial crisis took hold. Borrowing by the Berlin-based federal government will increase to 86.5 billion euros in 2010 and 72 billion euros in 2011 from 49.5 billion euros this year. Merkel’s goal before the crisis was to balance the federal budget by 2011.