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Tuesday, 16 May, 2000, 21:24 GMT 22:24 UK
Germany set for windfalls
A cleaner in Cologne
The future is looking bright for German finances
By the BBC's Rodney Smith

Suddenly, everyone is doing it - Governments are getting IN more money than they expected or hoped for.

The process began with privatisations back in the 1980s, which gave a specific boost to Margaret Thatcher's Britain.

Lately the extraordinary 23bn (38bn euross) windfall from the auction of third generation mobile phone licences has enhanced that.

In the US, a flood of tax income generated by the booming economy there has given the Clinton Administration the nation's largest ever budget surplus, a subject of widespread debate there.

Now it's Germany's turn.

Like the UK, the Berlin government is planning to auction third generation mobile phone licences.

Privatisations to come

Like Britain, it hopes to raise a great deal of cash - latest estimates reckon about 50bn euros, and that could be conservative.

Not only this, but the Berlin government is due to reap the rewards of a third round of privatisation at Deutsche Telekom in a month and a half, and the sale of Deutsche Post in four or five months' time.

All up, Berlin could be about to gain a 75bn euro-plus windfall this year ... just when it needs it dearly.

There is a cost, as the hard-working economics team at Paribas in London have worked out in a note to clients - as the UK and the US have discovered in the past, it is the pressure from special interest groups to spend.

Rather like a bank manager, the prudent finance minister, and Germany is proving to have one in Hans Eichel, must do what he can to keep the cash under his control until he is fully satisfied (a) that it is as much as he had hoped for or more, and (b) he has a sound long term plan for dealing with it.

Cheerful outlook

The solution is simple and attractive in Germany.

Part of the process of liberalisation involves the restructuring of Germany's highly protected and protective tax system.

It includes substantial tax cuts - so the likely windfall this year could lubricate and speed up that process enormously.

Then there's the cream on the Black Forest Gateaux.

German growth is already speeding up this year - Berlin has already raised its forecast to 2.75% - many independent economists believe that's conservative, that 3% is more likely.

Germany could be a cheerful place to be this year and next.

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03 Apr 00 | Business
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