Germany can boost spending despite EU fiscal rules, finance minister says

By Maria Martinez

BERLIN (Reuters) -The new German government does not expect the European Union's debt rules to put the brakes on the country's planned spending spree, German Finance Minister Lars Klingbeil said on Monday.

"I am very optimistic and confident that we will be able to find a common path with the commission," Klingbeil said in Brussels ahead of a meeting of EU finance ministers. 

Germany's parliament approved in March plans for a massive spending surge, including the removal of defence investment from rules that cap borrowing.

The question now is if this spending boost could breach the European fiscal rules negotiated by Christian Lindner, who was finance minister for much of the previous coalition government.

Klingbeil said his ministry is working on the draft budget for 2025, which he aims to have ready in June, and then all the questions about deficit limits will be clarified.

The new government of conservative chancellor Friedrich Merz in coalition with the centre left Social Democrats (SPD) of Klingbeil has also announced policies such as tax cuts and raising the minimum wage to revive stalled growth in Europe's biggest economy.

More growth in Germany with the reforms of the new government will be good news for Europe, Klingbeil said, citing lower energy prices, bureaucratic cuts and tackling the shortage of skilled workers.

Germany was the only member of the G7 advanced economies that failed to grow for the last two years, and the tariffs announced by U.S. President Donald Trump would deal a major blow - possibly putting it on track for a third straight year of recession for the first time in post-war German history.

Klingbeil expressed his support for the European Commission's approach to trade policy with the U.S.

"We want to be in dialogue, we want to find a solution, but we are also ready in case it is not possible to find an agreement in the coming weeks," Klingbeil said. 

The European Commission on Thursday proposed countermeasures on up to 95 billion euros ($105.61 billion) of U.S. imports if negotiations with Washington fail to remove Trump's tariffs.

($1 = 0.8995 euros)

(Reporting by Maria Martinez and Christian Kraemer; editing by Rachel More and Paul Simao)