BERLIN (MNI) - Germany's government cabinet Wednesday approved a revised 2010 budget bill that foresees record net new borrowing next year due to decreasing tax revenue, rising unemployment-related spending and costly measures to counter the economic and financial crisis.

Federal net new borrowing is tabled at E85.8 billion in the reworked bill. In the initial draft, the government had aimed for E86.1 billion in net borrowing.

On top of the E85.8 billion, the government projects some E14.5 billion of federal net borrowing for its special funds to support financial institutions and stabilize the economy, which are administered outside the regular budget.

Finance Minister Wolfgang Schaeuble said at a press conference after the cabinet vote that federal gross borrowing will amount to E357 billion next year. A senior finance ministry source, though, had pointed on Sunday to uncertainties regarding gross borrowing in 2010 because it is difficult to estimate how big the actual funding need for the government's Financial Market Stabilization Fund (Soffin) will be.

The budget assumptions are based on the "rather cautious" projections of 1.2% GDP growth next year, the Minister said. The interest rate risk to the budget is "limited," he reckoned. "I don't believe that we will have to expect dramatic interest rate developments in the eurozone," he said.

In a meeting of the parliamentary budget committee today, Schaeuble said the measures foreseen in the budget bill had an economic stimulus effect of 1% of GDP. "The crisis has not been overcome," he said, warning that job market developments next year are a risk to the budget assumptions.

The 2010 budget bill had to be reworked due to the change of government this autumn. The finance ministry hopes that the budget will be passed by parliament by the end of March. Traditionally, borrowing targets are altered somewhat in the parliamentary process.

Schaeuble reaffirmed that the government will start to cut the structural deficit of E70 billion by E10 billion each year to meet the federal deficit limit of 0.35% of GDP in 2016 set under the German debt limitation rule. However, he categorically ruled out a raise of value added tax rates in the current legislature until autumn 2013.

Schaeuble said Greece's current budget difficulties showed what happened if consolidation is delayed for too long. "Greece is causing us a lot of worries," he remarked.

Germany's total public deficit will likely amount to between 2.9% and 3.1% of GDP this year, the Minister told parliamentarians in the budget committee meeting. "We will know the exact amount only at the start of 2010," he said. For the coming year he first predicted a deficit of 5% of GDP, yet on presenting the budget to the press later he corrected that, saying it will be "rather close to 6% than 5%."

Schaeuble stressed that it is "essential for the sustainability of the European currency" that Germany adhere to the principles of the EU Stability and Growth Pact. The stability of the euro on international markets has to be preserved over the coming years, he said. "There exist significant dangers," he warned, without specifying what these risks were.

The revised 2010 budget bill foresees federal spending next year of E325.4 billion, down from E327.7 billion in the initial bill.

Federal tax revenue in 2010 is now estimated at E211.9 billion, down from E213.8 billion in the previous draft. Other income is projected at E27.7 billion, slightly below the E27.8 billion in the initial bill. This includes proceeds from highway tolls, distributed dividends and the Bundesbank profit.

The budget calculations already include some E3.9 billion in federal tax revenue losses next year from the tax cuts foreseen under the government's growth acceleration bill. However, it is still unclear whether there will be a majority for the tax cut bill on Friday in the upper house of parliament, the Bundesrat, which represents the 16 states. The lower house, the Bundestag, has already approved the bill.

Due to slightly better economic trends and lower unemployment than previously expected, the ministry now projects actual federal net new borrowing for the current year at only E37.5 billion, down from the E49.1 billion forecast in the second 2009 supplementary budget. On top of that it expects a net borrowing need of some E23.5 billion for its special funds.