Flush with cash, Germany finds another 5 billion euros to spend

[March 03, 2015] By Erik Kirschbaum

BERLIN (Reuters) - The German government, flush with cash after last year posting of its first budget surplus since 1969, said on Tuesday that it will boost investment spending by some 5 billion euros over the next three years on top of 10 billion previously announced.

Under pressure from its European Union partners and the United States to raise its public investment spending, the Finance Ministry said that it will give local communities some 3.5 billion euros over the next three years from a new fund of "special assets" along with an added 1.5 billion euros in 2017.

"All in all, the federal government will be making available some 5 billion euros to towns and cities in the coming years, and thus underscoring its commitment to the municipalities," the finance ministry said in a statement.

Finance Minister Wolfgang Schaeuble had already announced plans to devote an extra 10 billion euros in public investments in November, an amount that was at the time criticized as insufficient.

The German government on Tuesday also agreed the details of that 10-billion euro investment boost, earmarking 7 billion of that for transport, Internet expansion, energy efficiency, fighting climate change and for urban development.

Belying the euro zone crisis that has crippled growth and caused tensions in the currency bloc, Germany's federal government managed to post a 500 million euro budget surplus in 2014 - its first surplus since 1969.

The total surplus from federal, state and local governments and its social security system was 18 billion euros in 2014.

Despite the increased spending, Germany's infrastructure investment has lagged demand for many years.

A group of German mayors said in November that 118 billion euros of investment was needed for roads and buildings, while another public committee has called for investments of 7.2 billion euros a year to fix public transport infrastructure.

The DIW economic think-tank in Berlin estimates Germany needs 80 billion euros in additional public and private investment per year to close a gap with its euro zone peers.

The U.S. government has also argued that Germany needs to spend and invest more both at home an abroad.

(Additional reporting by Matthias Sobolewski and Elias Schneider; writing by Erik Kirschbaum Editing by Jeremy Gaunt)

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