Enjoying a balanced budget, Germany will boost spending: govt sources

After balancing its budget for the first time in almost half a century, Germany's government plans to increase spending on infrastructure and foreign aid over the next five years, senior government sources said on Friday. 

PHOTO: AP

14 Mar7:46 AM

[BERLIN] After balancing its budget for the first time in almost half a century, Germany's government plans to increase spending on infrastructure and foreign aid over the next five years, senior government sources said on Friday.

Berlin achieved the so-called "schwarze null" (black zero) - a federal budget in the black, or fully balanced - a year early, in 2014, a boon for Angela Merkel's coalition government that has preached budget discipline to its euro zone partners.

But Europe's biggest economy has come under international pressure to help global growth by loosening its purse strings and raising public spending to fix creaky infrastructure while it can benefit from rock-bottom interest rates.

As part of a supplementary 2015 budget to be debated by the cabinet on Wednesday, the government plans to increase spending by 4.2 billion euros (US$4.5 billion) to 302.6 billion euros this year, the sources said - but without straying from the balanced budget.

This includes a one-off payment of 3.5 billion euros into a new investment fund for financially weak local communities.

For 2016, the government expects to increase spending by 3.3 per cent to 312.5 billion euros, which should grow to 334.0 billion euros by 2019. Tax revenues are expected to rise over the same period, so the government does not foresee the need to issue any new debt.

Alongside investment in infrastructure and internet expansion, the government plans to raise significantly its spending on foreign aid and has budgeted 8.3 billion euros for this in the period 2016-2019.

After the Islamist attack on French satirical newspaper Charlie Hebdo in January, the government also plans to give more money to security agencies and top up funds to modernise the army, the sources said, without specifying the amount.

REUTERS

      

China issues final list of restricted foreign investment sectors

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Michael Martina, Reuters
8:06 AM, E.T. | March 13, 2015
International

Tags: China

 

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China's top economic planning agency issued a final list of restricted and prohibited industries for foreign investors, slightly elaborating on an earlier draft that had been criticized by foreign business lobbies as being too broad.
China has vowed to increase the competitiveness of its economy by loosening restrictions on its manufacturing and service sectors, as it tries to improve inefficient state-owned firms by adopting market friendly policies to stave off slowing growth.
In a preliminary list issued in November, the National Development and Reform Commission (NDRC) cut the number of sectors where foreign investment is restricted to 35 from 79, opening up areas such as real estate, steel, oil refining, paper making and premium spirits.
However, it outright prohibited foreign investment in 36 areas, with Chinese legal affairs consulting, tobacco and cultural relics businesses added to the list.
The final list, issued jointly by the NDRC and the Commerce Ministry online on Friday but set to go into effect on April 10, largely mirrored the earlier draft. The regulator kept the prohibition on foreign investment in 36 sectors, while the number of restricted industries grew slightly to 38.
"This catalogue revision suits the new situation of our country's reform, development and economic globalisation," the NDRC said in a statement accompanying the list. It said the list had already been approved by the State Council, China's cabinet.
Among the list's main aims were to "orderly advance service industry openness" and put forward a series of opening measures in the logistics, e-commerce, transportation, social services, finance and cultural sectors, the NDRC said.
While this represents progress for foreign investment in China, it is only incremental, said James Zimmerman, chairman of the American Chamber of Commerce in China.
U.S. businesses are focused on completing a "high-standard" bilateral investment treaty between the United States and China with only limited exclusions, he said.
"We believe that there is much room for improvement to ensure a greater level of market access in various sectors."
China's government plans to reform state-owned enterprises but has been reluctant to cede too much control over industries it deems central to national interests.
Foreign business lobbies had said the improvements in the draft fell short of expectations, instead advocating that China adopt a much shorter "negative list" of off-limit industries while further opening access to the services sector.
The new list replaces one that was issued in 2011, and features 349 areas where foreign investment is encouraged.

10 March 2015 Last updated at 18:13 ET

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'Extremely foolish' to cut rates, says Mark Carney

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Mark Carney has said it would be "extremely foolish" for the Bank of England to cut interest rates to try to combat low inflation.

The Bank of England governor reiterated comments made in February that the drop in prices was temporary and largely caused by the sharp fall in oil prices.

Mr Carney said he expected inflation to fall to around zero and stay there for much of the rest of the year.

UK inflation fell to 0.3% in January, marking its lowest rate on record.

"The thing that would be extremely foolish would be to try to lean against this oil price fall today [and] try to provide extra stimulus to try to get inflation up at this point in time.

"The impact of that extra stimulus ...would happen well after the oil price fall had moved through the economy and we would just add unnecessary volatility to inflation. That would be foolish," Mr Carney told the House of Lords economic affairs committee.

But he said the Bank was "vigilant to the possibility" that a period of low prices, such as in energy and food, could start to change consumer expectations hitting spending and wage growth.

Wage fears

Mr Carney's words chimed with a speech by Monetary Policy Committee (MPC) member Ian McCafferty who said the decline in oil prices was likely to dampen inflation for a long time.

But Mr McCafferty, who had consistently voted for higher interest rates before voting to keep them at their current 0.5% low, also warned that long-term low inflation could push down wage growth.

"It is therefore not a risk that we can dismiss," Mr McCafferty said in a speech at Durham University in the north-east of England.

Oil exploration

The price of oil has halved since June, with Brent crudecurrently trading at $56.42.

With high levels of oil output from the US and no sign of a sustained economic recovery in Europe, most experts believe prices will remain low for the foreseeable future.

However, the low cost of crude may also make investment in some new wells uneconomical - which means prices could rise in the longer term.

But Saudi Arabia's King Salman, who acceded to the throne in January after the death of his brother King Abdullah, said earlier that low oil prices would not halt progress in his country.

King Salman said the kingdom would continue oil and gas exploration despite the fall in crude prices.

Saudi Arabia is the world's largest oil exporter.