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Deficit will meet EU limits in 2011, Germany says

The Local · 15 Oct 2010, 15:58

Published: 15 Oct 2010 15:58 GMT+02:00

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"We are confident that we will reach three percent (of gross domestic product (GDP)) next year," spokesman Steffen Seibert told a regular government briefing. "Our efforts have paid off."

The deficit - the gap between public spending and revenues - is expected to be around 4.5 percent of GDP this year, the spokesman added, thanks to a strong economic recovery in Europe's biggest economy.

German Chancellor Angela Merkel's government, in common with others in Europe, has launched an austerity drive aimed at cutting government expenditure by tens of billions of euros.

Her government has passed a constitutional amendment requiring requiring an approximately balanced budget by 2016.

Other countries among the 16 nations using the euro single currency are faring less well, and are struggling to patch up their tattered public finances after being buffeted by the global downturn in 2009.

Spain and France, for example, have both forecast a deficit of six percent of GDP in 2011 and Italy 3.9 percent, according to their governments.

European governments, Germany included, are also faced with ageing populations, hitting tax receipts as the working population shrinks and increasing their pensions bill as more and more people take retirement.

Merkel has been strident in her demands for harsher penalties for fiscal sinners after Greece came close to defaulting on its debts earlier this year and wrecking the eurozone.

Germany's six leading economic institutes this week more than doubled their forecast for growth this year to 3.5 percent, the strongest expansion since European Union records began, according to EU statistics.

This followed, however, a 4.7-percent decline in output in 2009, Germany's sharpest drop since World War II, as demand for its all-important exports fell around the world.

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Merkel's centre-right government currently forecasts 1.4 percent growth this year, but ministers have indicated that the projection will be raised when fresh estimates are released on October 21.

Government programmes helped keep a lid on unemployment, and the institutes predicted in their twice-yearly report that the number of jobless would fall below three million next year for the first time since 1992.

But Germany has been accused of relying too heavily on exports and not doing enough to boost domestic demand, dampening demand for goods made by firms abroad and contributing to global imbalances with its trade surplus.


The Local (news@thelocal.de)

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Your comments about this article

11:08 October 18, 2010 by auniquecorn
And they can easily do this with the;

big tax increases plan
00:27 October 25, 2010 by BenOdin
Accused of "relying too heavily on exports", well what a rather foolish statement if i may say so myself!

Germany and its infrastructure are based around Exportation; the German economy itself would not exist as it does if it were not for its strong output of exportational goods. I feel that the statement is due to many other countries within the EU being somewhat jealous as to the elitism created by the German Economic system. I myself have seen first hand how the German people live within the country and i must say that they are in no way at a disadvantage because their country focuses on Exportation as the main frame of its Profit and as the main contributor to its GDP. Of course it may backfire such as it has done in the recession, but in Monetary Economics where is there financial gain without risk i ask you?

One must consider Germany and the Businesses within the country to almost act as one. In a very broad minded sense, Germany itself is the Business with each Firm existing within the body acting more so as a cog in the machine requiring export to keep them turning. Therefore to criticise a nation for focusing more heavily on International trade rather than Internal Domestic Demand (which i might add is rather well seen to) is as i have already said; rather foolish, especially considering that the estimated GDP will reach 3% in 2011.

Countries are to learn from the German nation, not find fault with its methods of productivity and further more its overall Economy!
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