Angela Merkel, German chancellor, is sticking with plans to cut public spending and hold off tax cuts even as the country's recent growth spurt suggests that the economy this year could expand at twice the rate last forecast by Berlin.
“Consolidating the budget is the main priority,” a spokesman for Ms Merkel said after the announcement on Friday that Europe's largest economy grew by a hefty 2.2 per cent in the second quarter.
With many economists now expecting growth to hit 3 per cent in 2010 – more than double the 1.4 per cent forecast by the government in April – the government is considering what to do with the extra tax intake that will result. Experts forecast more than €10bn ($12.8bn) in extra takings for federal, state and municipal coffers, with Ms Merkel's administration getting half of that.