Germany, Europe’s largest economy, has unveiled its 2018 federal budget, which includes increased payments to schoolteachers, firefighters and nurses, as well as a 25 percent pay increase for 2.4 million public servants — or a total increase of €26 billion in 2018. Chancellor Angela Merkel made the move after an election in November saw German voters increase support for the far-right Alternative for Germany party and Green parties who generally favor more spending on healthcare and education, other policies criticized by the ruling Christian Democratic Union.
The public sector budget raise, announced on Wednesday and effective this year, equals roughly 1.1 percent of gross domestic product, while total government spending will increase by just 3.3 percent.
Merkel has maintained that the government is running on a surplus, and that it can afford the pay raises for public sector workers as well as reforms to close the gender pay gap in government, set to pass in June.
In an unusual interview with the Bild daily, Merkel said that Germany’s economy is growing better than many other countries’ but that it is necessary to keep reducing its debt. This comes as Germany has been one of the largest providers of European Union funding to poorer member states.
Merkel has been dogged by questions over her plans for the next German election, to be held in 2021, in which she is seeking a fourth term in office, and is competing with several of her party allies, including vice chancellor Sigmar Gabriel and the popular politician, Jens Spahn, for support among party activists and rank-and-file voters. In a recent survey, only 30 percent of respondents chose Merkel as their preferred candidate.
Germany’s economy grew by 1.8 percent in 2017, with most economists expecting growth to top 2 percent in 2018.