–Adds FinMin Remarks And More Details To Story Sent Out At 08:48 GMT

BERLIN (MNI) – The German government cabinet on Wednesday adopted a
bill which implements several of the measures of its budget
consolidation plan decided in June.

“Budget consolidation is key for a sustainable positive economic
development,” Finance Minister Wolfgang Schaeuble said at a press
conference on presenting the bill.

The mix of spending cuts, higher fees and some tax hikes are to
consolidate the federal budget by E3.506 billion in 2011, E5.38 billion
in 2012, E5.68 billion in 2013 and E4.81 billion in 2014.

Later this month, the government aims to introduce a nuclear energy
tax which is to yield E2.3 billion per year.

Moreover, it plans for E2 billion in annual revenue from a
financial transaction tax by 2012. However, Schaeuble acknowledged that
such a tax needed to be introduced on an European level and it was,
thus, still uncertain if it would actually come about.

Altogether, including the spending cuts to be done in the annual
budget bills, the consolidation amount is to be brought up to E11.206
billion in 2011, E18.58 billion in 2012, E23.58 billion in 2013 and
E26.51 billion in 2014. The measures are roughly in line with the
country’s debt limitation rule, which requires that the federal
structural deficit be reduced to 0.35% of GDP by 2016.

The bill needs only the approval of the Bundestag, the lower house
of parliament, where the government controls a safe majority.

The upper house of parliament, the Bundesrat representing the 16
states, could only delay the bill somewhat but not block it
indefinitely. Chancellor Angela Merkel’s CDU/CSU-FDP coalition recently
lost its majority in the Bundesrat.

In its medium-term fiscal outlook passed in July, the government
projects federal net new borrowing of E57.5 billion in 2011, E40.1
billion in 2012, E31.6 billion in 2013 and E24.1 billion in 2014.

Due to the strong economic upswing, the government now expects
federal net new borrowing of below E60 billion in the current year, down
from the previously forecast E65.2 billion.

— Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com —

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