German government's 2020 budget plan calls for 1.7 pct growth in spending

The German government's balanced budget plan for 2020 calls for a 1.7 per cent hike in spending to 362.6 billion euros, relying on cost-cutting to avoid incurring new debt given forecasts for slower economic growth, Finance Ministry sources said on Monday. The plan assumes Germany's economy - the largest in Europe - will grow by 1.0 per cent in 2019, down from the 1.8 per cent initially projected, the sources said.

To balance the budget, the government ministries will have to identify combined spending cuts of 625 million each year, the sources said. The budget foresees boosting the share of defence spending to 1.37 per cent of gross domestic product (GDP) in 2020 from 1.25 per cent in 2018, but dropping back to around 1.25 per cent in 2023, the sources said.

That is below the 2 per cent target set by NATO members for 2024, and below the 1.5 per cent share that Germany has pledged to meet by that date. The sources said further increases would be negotiated year to year.