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Economy & Euro
Saturday 25 February 2006
Published: Thursday 23 February 2006 | Updated: Thursday 23 February 2006 | Print this article Sprachen: [DE] Germany on course to tame budget deficit In Short: The Commission applauds Germany's budget deficit figure for 2005 as "much better than expected," and Berlin vows to bring the figure below 3% of GDP in 2007. Brief News: Germany's economy is "entering a consolidation phase," said the country's Finance Minister Peer Steinbrck, commenting on the endorsement by Chancellor Angela Merkel's cabinet of the country's 262 billion euro budget for 2006. Berlin considers the time ripe to temper its deficit. Under a deal struck between Berlin and Brussels, the Commission is now set to give Germany an extra year to sort out its budget deficit, which is expected to be around 3.3% of GDP in 2006. For the fifth year in a row, Germany has been in breach of the EU's Stability and Growth Pact, which sets a 3% deficit ceiling. In 2005, the deficit was 3.3%, 0.2% lower than originally projected. Steinbrck said that in 2007 the country may prove able to keep its deficit at or below the 3% level. The country's 2007 budget, based on a deficit of 2.5%, is scheduled to be endorsed by the cabinet in July. Should the country continue to exceed the 3% deficit limit, it would face a theoretical threat of sanctions from the Commission, will which assess the German situation next week. Commenting on Steinbrck's announcement, Monetary Affairs Commissioner Joaquin Almunia said that "the final figure [for 2005] is much better than expected [...] even a few weeks ago." The German cabinet also approved plans to increase value-added tax by 3% to 19% in an attempt to slash the deficit. The measure, which is expected to generate some 20 billion euros in revenue, is due to
be introduced in January 2007. Part of that 20 billion purse will be used to offset a 2% cut in payroll taxes paid by employers and employees. In addition, Berlin aims to reduce net debt from 38.3 billion euros in 2006 to 22 billion in 2007 and 20 billion in 2009. Links Press articles MSNBC: Germany avoids EU action over budget People's Daily: German government unveils draft budget for 2006 Expatica: German government agrees to hike VAT to 19pc MSN Money: EU Praises German Budget Deficit Figures Business Week: German government approves 2006 budget ForexTV: German govt passes planned 3 pct VAT hike as part of 2006 budget Les chos: Dficits et optimisme excessifs FAZ: Steinbrck meldet fr 2006 ein Defizit von 3,3 Prozent Reuters Deutschland: Steinbrck plant 2006 Defizitquote auf Vorjahresniveau Die...