Germany, Europe's powerhouse economy, said Monday it would balance its public finances sooner than expected, slashing this year's projected budget deficit to 1.5 per cent from 2.5 per cent.
As eurozone partners work on ever tighter austerity plans to balance their books, Germany leads the pack in the strength of its finances — it had a 2010 deficit of 3.3 per cent, just above the EU ceiling of 3.0 per cent despite having spent heavily on stimulus programmes to offset the worst recession since 1945.
'The positive development this year will continue until 2015, which will allow us to balance the accounts in 2014,' the ministry said in a monthly report published on its Internet site.
Germany previously aimed to balance its finances by 2016 under a law requiring the government to ensure that it does not overspend.
The public deficit — the shortfall between revenues and spending — includes regional state budgets along with those of municipalities and the national social security system.
Under the terms of the EU's Stability and Growth Pact, governments are not supposed to exceed a public deficit of 3.0 per cent of Gross Domestic Product and must work towards a balance or even surplus in times of economic growth.
Total accumulated debt, meanwhile, 'will fall between now and the end of the year to 80 per cent of GDP and will thus be about three percentage points lower than in the previous year,' the ministry's report said.
In 2015, Germany forecasts public debt equivalent to 71 per cent of GDP, down from 2010's 83.2 per cent — still well above the EU limit of 60 per cent but positive compared with, for example, Italy's 120 per cent.
Germany, which underwrites a large share of the eurozone rescue packages, is getting its own finances in order on the back of strong economic activity that has helped cut unemployment.
The narrowing public deficit might give the conservative-liberal government coalition a chance to implement tax cuts in time for elections in 2013.
That could help boost domestic consumption which appears threatened by constant discussion of bailout packages for partner countries on the eurozone's southern rim.
Source : New Age
