BERLIN: The German government on Friday cut its tax revenue forecast for next year, which could make it difficult for Berlin to maintain its budget surplus while it looks after hundreds of thousands of migrants.
German Finance Minister Wolfgang Schäuble said taxes will total €686.2 billion ($747 billion), €5.2 billion lower than previously estimated. That gap could create pressure for Europe’s largest economy, which is showing signs of weakness on top of the migrant crisis burden. The country expects at least 800,000 migrants this year alone, a record number that has sparked deep debate about how Germany will cope financially and culturally.
Chancellor Angela Merkel has faced a political backlash at home for her open-arms policy toward the hundreds of thousands of refugees striving to reach Europe from the Middle East, Africa and Asia. The country’s states have complained about the financial burden and opinion polls highlight increasing concern among Germans.
Ms. Merkel Thursday appeared to have overcome a weekslong spat in her ruling coalition over how to deal with the crisis and its financial consequences, with the partners agreeing to a set of measures to try to limit the tide of migrants.
Berlin earlier pushed through legislation to allow it to use excess tax revenue from this year to help pay for the response. It set aside an additional €6 billion for this year and next to help its 16 states with the costs to feed and shelter the migrants. Ms. Merkel has ruled out raising taxes.
Mr. Schäuble sought to stick to the promise of a balanced budget despite the tax forecast.
“The German state is solidly financed and capable of acting,” Mr. Schäuble told reporters while across town Ms. Merkel was meeting with leaders of her coalition.
A balanced budget was a key point of Ms. Merkel’s 2013 campaign and is seen as an essential barometer of the country’s economy. Germany balanced its budget for the first time since 1969 in 2014, a year earlier than expected, thanks to higher tax revenue and lower spending.
Recent indicators have raised some alarms, however. German manufacturing orders dropped for the third month in a row, data showed Thursday, the clearest sign yet that slower growth in China and recessions in other key developing markets are undermining growth in the export-driven economy.
Some economists have already trimmed their outlooks for Europe’s powerhouse. The European Commission Thursday cut its projections for economic growth to 1.7% this year from its previous estimate of 1.9%. It forecast growth of 1.9% next year and 2017, compared with its previous 2016 estimate of 2.0%.
Mr. Schäuble cautioned that Germany’s future budgetary situation hinges on how the migrant situation develops.
“What the situation means for the years to come, I can’t say definitively today,“ Mr. Schäuble told reporters. “I hope there won’t be 800,000 migrants coming here in 2016, I don’t think anybody in Germany wishes that.“
In an effort to limit the numbers of migrants, coalition members agreed to set up special centers for those with little prospect of gaining asylum. The government will set up three to five so-called registration centers across the country where migrants will be obliged to stay during a fast-track asylum procedure in a bid to speed up deportations and limit the financial burden.
The plan is a compromise between demands from Ms. Merkel’s center-right coalition ally, the Christian Social Union, who has threatened the chancellor with ultimatums to stop the migrant tide, and the Social Democrats, who were against making rules too strict.
“We’ve made a considerable step forward in three points: helping, order and steering,” said Sigmar Gabriel, SPD leader and vice chancellor.
It remains to be seen if the new toughening of rules can slow the tide. In October alone, 54,877 people registered for asylum in Germany, a 28% rise from the previous month.
