Deficit will meet EU limits in 2011, Germany says

Germany said on Friday it was "confident" of cutting the deficit on its public finances to within EU limits in 2011, the first major eurozone economy to do so since the global recession.

Deficit will meet EU limits in 2011, Germany says
Photo: DPA

“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.

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.


Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


‘We agree to disagree’: Still no progress in marathon SAS strike talks

By lunchtime on Friday, talks between the Scandinavian airline SAS and unions representing striking pilots were still stuck on "difficult issues".

'We agree to disagree': Still no progress in marathon SAS strike talks

“We agree that we disagree,” Roger Klokset, from the Norwegian pilots’ union, said at lunchtime outside the headquarters of the Confederation of Swedish Enterprise in Stockholm, where talks are taking place. “We are still working to find a solution, and so long as there is still some point in continuing negotiations, we will do that.” 

Mats Ruland, a mediator for the Norwegian government, said that there were “still several difficult issues which need to be solved”. 

At 1pm on Friday, the two sides took a short break from the talks for lunch, after starting at 9am. On Thursday, they negotiated for 15 hours, breaking off at 1am on Friday morning. 

READ ALSO: What’s the latest on the SAS plane strike?

Marianne Hernæs, SAS’s negotiator on Friday told journalists she was tired after sitting at the negotiating table long into the night. 

“We need to find a model where we can meet in the middle and which can ensure that we pull in the income that we are dependent on,” she said. 

Klokset said that there was “a good atmosphere” in the talks, and that the unions were sticking together to represent their members.

“I think we’ve been extremely flexible so far. It’s ‘out of this world’,’ said Henrik Thyregod, with the Danish pilots’ union. 

“This could have been solved back in December if SAS had not made unreasonable demands on the pilots,” Klokset added. 

The strike, which is now in its 12th day, has cost SAS up to 130m kronor a day, with 2,550 flights cancelled by Thursday, affecting 270,000 passengers.