BERLIN, Oct 18 (Reuters) - German Chancellor Angela Merkel's conservatives and the Free Democrats (FDP) are considering introducing a supplementary budget for this year under a planned new centre-right coalition, two party sources said on Sunday.
Merkel's conservative bloc and the pro-business FDP, in negotiations to forge a policy platform under a new coalition, are haggling over how to tackle Germany's bulging budget deficit and over the financing of tax cuts they want to introduce.
'(With a supplementary budget), additional spending could be spread over several years,' said one party source. Neither source put a figure on the size of such a budget.
It was unclear how future spending could be booked for this year, but one possibility might be a special purpose vehicle that could be used again in coming years, said one source.
If agreed, it would be Germany's third supplementary budget this year and could give the parties more room for manoeuvre in their talks on financial policy.
The parties are haggling over tax relief. While both parties want cuts, they are at odds on their scale and how to fund them.
Some senior conservatives say ambitious tax relief is unaffordable and want to rein in spending to finance the tax cuts plus a 30 billion euro budget hole. However, Merkel has ruled out aggressive spending cuts.
Europe's biggest economy emerged from its deepest recession since World War Two in the second quarter, but economists say the recovery is fragile.
The government expects Germany's public deficit to swell from 3.7 percent of GDP this year to 6 percent in 2010, which would be twice the EU limit. The European Commission has launched disciplinary steps against Germany over its deficit.
(Reporting by Matthias Sobolewski and Andreas Moeser, editing by Will Waterman) ($1=.6702 Euro) Keywords: GERMANY COALITION/BUDGET (madeline.chambers@reuters.com; +49 30 2888 5230; Reuters Messaging: ann.chambers.reuters.net@reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Merkel's conservative bloc and the pro-business FDP, in negotiations to forge a policy platform under a new coalition, are haggling over how to tackle Germany's bulging budget deficit and over the financing of tax cuts they want to introduce.
'(With a supplementary budget), additional spending could be spread over several years,' said one party source. Neither source put a figure on the size of such a budget.
It was unclear how future spending could be booked for this year, but one possibility might be a special purpose vehicle that could be used again in coming years, said one source.
If agreed, it would be Germany's third supplementary budget this year and could give the parties more room for manoeuvre in their talks on financial policy.
The parties are haggling over tax relief. While both parties want cuts, they are at odds on their scale and how to fund them.
Some senior conservatives say ambitious tax relief is unaffordable and want to rein in spending to finance the tax cuts plus a 30 billion euro budget hole. However, Merkel has ruled out aggressive spending cuts.
Europe's biggest economy emerged from its deepest recession since World War Two in the second quarter, but economists say the recovery is fragile.
The government expects Germany's public deficit to swell from 3.7 percent of GDP this year to 6 percent in 2010, which would be twice the EU limit. The European Commission has launched disciplinary steps against Germany over its deficit.
(Reporting by Matthias Sobolewski and Andreas Moeser, editing by Will Waterman) ($1=.6702 Euro) Keywords: GERMANY COALITION/BUDGET (madeline.chambers@reuters.com; +49 30 2888 5230; Reuters Messaging: ann.chambers.reuters.net@reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.