The German government has revealed plans to sell EUR7 billion worth of shares in Deutsche Telekom and Deutsche Post next year in an effort to cut the country’s crippling budgetary deficit, which is expected to top EUR43 billion by the end of 2003. The news marks a change of opinion by Chancellor Gerhard Schroeder, who had previously earmarked just EUR2 billion worth of asset sales for 2004. The stocks will be sold to state-owned bank Kreditanstalt fuer Wiederaufbau (KfW) and the proceeds used to help pay the pensions of retiring Deutsche Telekom employees. Together the government and KfW currently hold 37% of the former telephone monopoly.
Germany’s budgetary deficit is expected to fall by a third to around EUR29 billion in 2004, but that is still above the level of 3% of GDP permitted under the EU’s Stability and Growth Pact – geared towards preventing governments from fuelling inflation and affecting the stability of the euro through overspending. The German economy suffered from a recession in the first half of 2003, but the situation is improving according to the Federal Statistics Office which last week said that GDP grew by 0.2% in the third quarter.