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Germany to breach EU deficit rule

by RogueTrooper Fri Jul 1st, 2005 at 07:15:52 AM EST

From the BBC

Germany looks set to face disciplinary proceedings after warning it is likely to break European Union (EU) budget deficit limits for another year.

Official figures showed that without policy changes Germany is likely to break the EU deficit cap of 3% of gross domestic product (GDP) until 2008.

It has already broken that limit every year since 2002, and is set to unveil a deficit of 3.7% of GDP in 2005.

Europe began action against Italy on Wednesday for breaking deficit rules.

The European Commission (EC) gave Italy until the end of 2007 to slash its deficit to below EU limits.

Italy's deficit stood at 3.2% of GDP in 2001, 2003 and 2004, and the EC has predicted it will record a 3.6% shortfall this year - before rising to 4.6% in 2006.

It looks like Germany will be sharing the same fate as the Italians.

Mr Eichel has claimed until recently that he could rein in the German deficit to 2.9% - in line with EU budget rules set out in the European Stability Pact.

The budget rulebook had been revamped after France and Germany repeatedly broke pact rules.

In December last year, the EC called a truce in its battle with the two over deficit limit breaches.

The move came after France and Germany vowed to run their budget deficits below the EU cap in 2005 - for the first time in four years.

But, the EC did warn the two were under close scrutiny and it would act if their fiscal situations deteriorated.

As a result of Mr Eichel's admission about the German budget the country now looks likely to face the same disciplinary fate as Italy this autumn.

So if Schröder gets voted out, will Merkel try to move towards "Free Market" economy?

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Fri Jul 1st, 2005 at 07:44:37 AM EST
Could very well be. The brief account I read of here politics makes her sound just a wee bit like a Dean Democrat in that she seems to be fiscally conservative and socially liberal.

Politically, she occupies more centrist ground on social issues such as abortion and legal rights for gay couples.

Her campaign is thought likely to focus on increasing the pace of reforming taxes, pensions and health - something her rival Mr Schroeder has tried to address in his Agenda 2010 for labour and social changes.

The rest of the article is here

Money is a sign of Poverty - Culture Saying
by RogueTrooper on Fri Jul 1st, 2005 at 08:52:25 AM EST
For context, the U.S. federal deficit for 2005 is projected to be 3% of GDP.
by asdf on Fri Jul 1st, 2005 at 06:21:32 PM EST
is that the 3% deficit limit was something that Helmut Kohl insisted on as a prerequisite for joining bringing Germany into the euro (it made it an easier sell to the folks at home, who were skeptical of the Med countries).

BTW, it is worth noting that Germany's deficit is also unconstitutional. The Basic Law stipulates: "Revenue obtained by borrowing shall not exceed the total of investment expenditures provided for in the budget;..." (Art. 115 GG)

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt št gmail dotcom) on Sat Jul 2nd, 2005 at 07:08:35 AM EST
Europe began action against Italy on Wednesday for breaking deficit rules.

What sort of action?  What can Europe do about this?
by Dale Read (dale43211-at-hotmail.com) on Sat Jul 2nd, 2005 at 02:57:06 PM EST

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