Germany achieved a larger-than-expected budget surplus of €12.1bn in 2015 and will use the windfall to pay for accommodating and integrating refugees, Finance Minister Wolfgang Schaeuble said yesterday.
Germany is at the centre of Europe’s biggest migrant crisis since World War II. More than 1mn people arrived in the country in 2015, far more than in any other EU country.
Higher tax revenue and auctions of mobile telephone licences provided the surplus, which is nearly twice the expected €6.1bn ($6.62bn).
That increases the chances that the budget will be balanced for a third straight year in 2016.
“We’ll urgently need the reserve to finance the additional spending on accommodating and integrating refugees,” Schaeuble said.
He added that achieving another balanced budget this year was realistic despite the ballooning refugee costs.
But a senior government official said it was hard to predict how the federal budget would develop because nobody could say how many refugees would arrive in Germany this year and beyond.
The DIW economic institute expects state spending on refugees will rise to €15bn in 2016 and €17bn in 2017.
Under German law, funds not spent at the end of the year must go to repay debt.
However, Chancellor Angela Merkel’s ruling coalition agreed last September, to funnel extra money from 2015 into a reserve to pay refugee-related costs.
One beneficiary may be construction companies.
Their industry association, HDB, said yesterday that higher state spending on infrastructure and a property boom will boost their sales 3% to €103bn ($111.37bn) this year, its highest since 2000.
Nearly 290,000 flats will be built in 2016, but that still is not enough to meet demand from the rising numbers of refugees and growing population, it said.
“In metropolitan areas, affordable housing is in short supply,” HDB president Thomas Bauer said.
More than 400,000 flats needed to be built annually to avert housing shortages in cities, he said.
Construction Minister Barbara Hendricks and Schaeuble are planning tax incentives for investors who build new apartments in certain city areas in the next three years. But the federal states have yet to agree to the plan.
Strong private consumption and higher state spending on refugees are expected to boost Germany’s gross domestic product this year and beyond, compensating for weaker demand from China and other emerging markets.
Germany’s BDI industry association expects the economy to grow by almost 2% in 2016, but it also warned of uncertainties and geopolitical risks.
BDI president Ulrich Grillo said that Germany’s current economic upturn depended on special factors such as low oil prices, low interest rates and a weak euro.
“I’m worried that the government, stuck in crisis modus due to the refugee question, will turn a blind eye to other challenges,” Grillo said, adding Berlin should not neglect public spending on infrastructure.
The economy ministry said Europe’s largest economy probably expanded in the fourth quarter of 2015 as employment and real incomes increased, even though industrial activity slowed.
German gross domestic product data for 2015 is due today.
Economists polled by Reuters expect GDP grew 1.6% last year.