960417

Bonn cash deficit

worsens in 1996

FRANKFURT: The German federal government's finances worsened in the first quarter of 1996 as the cash deficit climbed to 20.5 billion marks, more than double its year-ago level, the Bundesbank said on Wednesday.

Government cash outlays rose 13 percent in the period, far exceeding a 4.5 percent increase in cash revenues, the Bundesbank said in its April report.

"In the first quarter as a whole the federal government's cash position worsened," the report said.

The federal government financed the deficit mostly by issuing bonds but also by borrowing in the money market, the report said.

In March alone, a month when revenues are boosted by quarterly tax payments, the government incurred a five billion mark deficit after posting a small surplus in the year earlier.

The Bundesbank's data reflect payments and withdrawals from the federal government's accounts at the central bank.

The timing of these money transfers does not coincide with their inclusion in official budget statistics and the Bundesbank's data therefore diverge from official statistics, the bank said.

In April, Bonn will receive sizable new funds when the central bank transfers a portion of its 1995 profit to the government.

Economists forecast the Bundesbank's profit, to be announced on Thursday, will be around 10 billion marks and that the transfer to Bonn will be similar to last year's transfer of 10.237 billion marks.

The Bonn government has budgeted seven billion marks and will use the rest to retire old debt.

Separately, the report said German state spending on social support had risen sharply since the early 1970s and was likely to keep rising despite current efforts to reform the country's welfare system.

Social support -- money paid as a last resort to guarantee a minimum living standard when other benefit payments are insufficient -- doubled to 43 billion marks in west Germany in 1993 from 21 billion in 1985, the bank said.

It attributed the rise to mounting unemployment in 1992 and 1993 and a surge in the number of asylum-seekers, with about one million people applying for asylum in the period from 1991 through 1993.

Local authorities have to shoulder three quarters of the social support payments and the sharp increase in spending has made it difficult for them to reduce their budget deficits, which have been very high since the early 1990s, the bank said. 4Reut10:11 17-04-Reuter