Roundup: German gov't under pressure to balance refugee costs, boost investment

Germany on Wednesday reported an unexpectedly high budget surplus in 2015, prompting critics to argue the government had resources to stimulate the economy through investment.

But, the government said it planned to put the surplus toward covering refugee costs.

The country achieved a budget surplus of 12.1 billion euros (about 13.1 billion U.S. dollars) in 2015, German Finance Minister Wolfgang Schaeuble said, attributing the surplus to a "positive economic trend and provident budget policy-making."

The surplus nearly doubled the 6.1 billion euros which the government expected previously and allowed the government to deal with the influx of refugees more confidently.

"We will urgently need this reserve to finance additional outgoings for accommodating and integrating refugees," said Schaeuble in a statement, announcing that the surplus would be allocated over years by the federal government to finance refugee-related assistance.

Roughly 1.1 million refugees entered Germany last year. Most of them came from war-torn areas, such as Syria and Iraq.

According to the German Institute for Economic Research's (DIW) estimation, the German government spent just under 6.0 billion euros on refugees last year. Another 15 billion euros will be spent in 2016 and the costs will increase to 17 billion euros in 2017.

German industry, however, warned that helping refugees should not overshadow the country's urgent need to upgrade its infrastructure.

"The rate of investment in this country remains below its potential," said Federation of German Industries (BDI) president Ulrich Grillo on Wednesday.

"I warn against offsetting integration costs and investment costs against each other," he said, "Both must be priorities ... On both the future of our country depends."

BDI expected the German economy to expand by just under two percent this year, a trend driven mainly by consumption.

"The economy remains robust, but our strength is vulnerable," Grillo said. The dynamic consumption of late has depended on special factors such as favorable oil prices, historically low interest rates and a weak euro, but the trend is unsustainable, he added.

Grillo urged the government to increase public investment and make policies to stimulate private investment, especially in sectors of energy transition, digitization, and transport.

German economic output increased by 1.6 percent in 2014. It was expected to grow by 1.7 percent in 2015 and 1.8 percent in 2016.

According to German federal statistics office, Destatis, the production of capital goods such as machines and equipment decreased by 3.3 percent in November. In contrast, the output of consumer goods from German factories rose by 1.9 percent, adding signals that investment, one of the three engines for economic growth, remained stalled.

"The German economy's greatest weakness is the low public and private investment, which is still close to its historic lows despite dynamic consumer demand," said DIW's president Marcel Fratzscher. "Policy must not lose sight of the urgent need to improve the conditions for investment." Endit