Germany May Flout EU Budget Rules Again | Business| Economy and finance news from a German perspective | DW | 23.08.2005
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Germany May Flout EU Budget Rules Again

The German budget deficit amounted to 3.6 percent of gross domestic product in the first half of the year, raising the specter of the country, a repeat offender, flouting EU stability pact rules yet again.


Finance Minister Eichel is consulting the books to beat the problem

The Federal Statistics Office in Wiesbaden said Tuesday that Germany's public deficit amounted to 36 billion euros ($44.0732 billion) or 3.6 percent of gross domestic product in the first half of the year.

The figure was significantly lower than the 4 percent recorded in the same period last year, largely due to a stronger rise in revenues as compared to spending in the first six months of the year, according to the statistics office.

Despite the slight relief provided by the figures in a country whose economy has been near-stagnant in past years and is currently battling an unemployment rate of close to 11.5 percent, financial authorities have warned that Germany is still in hot water when it comes to attracting the attention of watchdogs in Brussels.

The European Union's Stability and Growth Pact, which underpins the euro, stipulates that eurozone members' public deficit cannot exceed 3 percent of gross domestic product.

Germany, one of the prime architects of the pact, has breached the stability pact rules for the last three years in a row. Last year it posted a deficit of 3.7 percent. The pact has thus been at the center of a row between Germany and the EU Commission for years. The commission has accused Germany of not doing enough to set its financial house in order and consolidate its policies.

Stability pact rewrite

Last year, the commission threatened to start disciplinary proceedings against the country, but the move was put on hold later.

In recent months, Germany along with France, another EU budgetary pact offender, has been at the forefront of a drive to water down the pact much to the anger of smaller eurozone members.

In March this year, the efforts bore fruit after EU ministers agreed on a plan that includes giving Germany special treatment because of the high costs of reunification, which Germany has said is largely to blame for its inability over the past three years to keep its deficit under the three-percent mark required by the original stability pact.

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