German 2014 budget deficit set to be halved

Germany's budget deficit will be substantially less than initially planned next year while 2015 is expected to see a budget surplus, largely due to the country's low borrowing rates, a government source said Saturday. The federal budget deficit will fall to 6.2 billion euros ($8.2 billion) in 2014, according to the draft budget which is due to be approved by the government next week, while an earlier estimate had reckoned on more than double that figure. The revised figure takes into account several factors, including five billion euros less in interest paid on debt compared to initial expectations, the source said. Since the eurozone's debt crisis began, Germany has had lower borrowing costs than its European partners with bonds from Europe's biggest economy enjoying safe-haven status, resulting in lower interest payments. Ten years ago interest payments amounted to about 40 billion euros a year, but last year had fallen to less than 30 billion euros, while the amount of debt has increased. In 2015 the federal budget is expected to show a small surplus of 200 million euros, according to forecasts by the finance ministry. The ministry wants the surplus, as well as the much larger ones projected for the two following years, to go towards paying off Germany's more than 2.0 trillion-euro debt. However, with elections scheduled for September, a new coalition government may be in power by then, plus it will be for lawmakers to decide what to do with the money, the source said. For this year the government will approve Wednesday an overall budget which will include a higher-than-initially-planned deficit of 25.1 billion euros after Berlin decided to borrow an extra eight billion euros to set up a fund to help victims of flooding earlier this month.