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The German cabinet approved on Wednesday budget plans for the next two years, including a higher-than-planned deficit for 2013 because of the cost of floods earlier this month.
The new projection will be the "smallest deficit in 40 years," Finance Minister Wolfgang Schaeuble told a news conference, who said that the success was due to "our discipline in spending."
The cabinet gave the go-ahead to an overall budget which will include a deficit of 25.1 billion euros ($32.7 billion) this year.
This is after Berlin decided to borrow an extra eight billion euros to set up a fund to help victims of the flooding.
Next year, Germany's budget deficit will be substantially less than initially planned.
And for 2015, the government is expecting a budget surplus, largely due to the country's low borrowing rates.
The federal budget deficit will fall to 6.2 billion euros in 2014, according to the draft budget approved by the cabinet, while an earlier estimate had reckoned on more than double that figure.
Over the period from 2010 until 2017, spending will have increased by just 1.5 percent.
The revised figure takes into account several factors, including five billion euros less in interest paid on debt compared to initial expectations.
"We're on the right path and we're confident we will remain so in the coming years," Schaeuble said.
Since the eurozone's debt crisis began, Germany has had lower borrowing costs than its European partners with bonds from Europe's biggest economy enjoying safe-haven status, resulting in lower interest payments.
Ten years ago interest payments amounted to about 40 billion euros a year, but last year had fallen to less than 30 billion euros, while the amount of debt has increased.
In 2015 the federal budget is expected to show a small surplus of 200 million euros, according to forecasts by the finance ministry.
The ministry wants the surplus, as well as the much larger ones projected for the two following years, to go towards paying off Germany's more than 2.0 trillion-euro debt.
However, with elections scheduled for September, a new coalition government may be in power by then, plus it will be for lawmakers to decide what to do with the money.