Debt laden German budget approved

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Debt laden German budget approved

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The chilly financial climate means German government borrowing will hit record levels next year.

The new centre-right cabinet has just approved a budget plan that includes almost 86 billion euros of new debt.

That is needed for increased social welfare spending as a result of the weak economy.

Finance Minister Wolfgang Schäuble was however upbeat. Hed said the Berlin government’s 1.2 percent growth forecast for the economy next year is “rather cautious.”

But even so, Germany’s budget deficit is projected to reach six percent of GDP in 2010, twice the level allowed under EU rules.

The largest share of the budget – 147 billion euros -will be spent on social welfare programmes including an increase in child benefits, plus pensions and unemployment benefit.

This year 16 billion euros is to be spent on Germany’s healthcare system, a 39 percent increase on 2009 and 11 billion will go to education and research.

The finance minister said the record borrowing was “necessary and right” as Germany is in the worst economic crisis of the post-war period but he stressed running up such debt was a “one-time” solution.