Still targeting balanced budget despite refugee costs: German finance ministry

Still targeting balanced budget despite refugee costs: German finance ministry

Coping with the flood of refugees is the main priority of the government, and ministers must subordinate any additional spending wishes to that, Deputy Finance Minister Thomas Steffen said in the ministry's latest monthly report.

Solid finances are needed if any government is to be able to react to unexpected challenges such as the refugee crisis, Steffen added.

"That's why the government still aims to achieve a balanced budget this year and next, despite the additional budgetary pressures," he said.

Coalition sources told Reuters on Thursday that the unexpected cost of looking after the refugees might scupper Finance Minister Wolfgang Schaeuble's cherished goal of achieving a balanced budget for the next five years.

Germany is shouldering most of the burden of the continent's biggest refugee crisis since World War Two. The government expects at least 800,000 new arrivals this year alone.

Turning to the economic outlook, the ministry said it expected the economy to continue its moderate economic upswing in the third quarter, adding that companies were benefiting from lower oil prices and the weaker euro.

"However, there are downside risks for foreign trade which result particularly from the economic slowdown in China and other emerging markets," the ministry said.

The BGA trade body said it expects Germany to post another export record this year while the Munich-based Ifo think-tank predicts that the current account surplus to hit a new record of 250 billion euros this year.

(Reporting by Michael Nienaber; Editing by Hugh Lawson)