BERLIN, June 28 (Reuters) - Germany's draft budget for 2018 and a blueprint for government spending up until 2021 include provisions for the impact of possible interest rate hikes by the European Central Bank, Finance Minister Wolfgang Schaeuble said on Wednesday.
Schaeuble, speaking at a news conference after the cabinet approved the spending plans, rejected criticism that income tax cuts of 15 billion euros ($17.06 billion) a year over that period was too low to significantly boost growth through consumption.
"A modest and reliable fiscal policy doesn't allow much more wiggle room (to cut taxes)," Schaeuble said. "Our mid-term fiscal plans take into account the possibility of moderate interest rate rises and we set aside provisions," he added.
The budget must still be confirmed by the lower house of parliament after a Sept. 24 national election.
Asked about Italy's decision to start winding down two failed regional banks in a deal that could cost the state up to 17 billion euros, Schaeuble said that the European Union needed to look again at whether loopholes were created by differences between bank closure rules and national insolvency regimes. ($1 = 0.8793 euros) (Reporting by Gernot Heller and Klaus Lauer; Writing by Joseph Nasr, editing by Thomas Escritt)