EU gives Germany formal warning over deficit

14th March 2006, Comments 0 comments

14 March 2006, BRUSSELS - German Finance Minister Peer Steinbrueck on Tuesday said he had no problem accepting the formal European Union warning on Berlin's national budget deficit, saying Germany would be in full compliance with EU fiscal rules next year.

14 March 2006

BRUSSELS - German Finance Minister Peer Steinbrueck on Tuesday said he had no problem accepting the formal European Union warning on Berlin's national budget deficit, saying Germany would be in full compliance with EU fiscal rules next year.

The German budget deficit would be down to 2.5 per cent of gross domestic product (GDP) by end 2007, Steinbrueck told reporters. EU rules demands that budget deficits are kept under 3 per of GDP.

Berlin would "set an example" for other countries striving to put their financial house in order, he added.

Steinbrueck made his comments after EU finance ministers formally endorsed eurozone demands late Monday for tougher action by Berlin to rein in its finances.

The German finance chief has been instructed to report back to the EU in July on Berlin's efforts to slash the budget deficit currently estimated at 3.3 per cent of GDP.

Austrian Finance Minister Karl-Heinz Grasser told reporters he was "very confident" that Germany would meet the "objectives and obligations' set by the stability and growth pact.

German economic figures were looking "very good," Grasser said, adding that he was optimistic the upbeat trend in Europe's largest economy would continue.

Berlin was being "very constructive" on the deficit warning and its commitment to the stability pact, he said. Austria is current president of the 25-nation EU.

European monetary affairs chief Joaquin Almunia also praised Germany's "attitude and intentions" and said Berlin's efforts to comply with EU rules would be judged in four months.

Almunia said he was "prudently optimistic" that Steinbrueck's fiscal programme would win commission approval.

Brussels issued its first warning on Berlin's finances in November 2003, triggering a major row with the government of former chancellor Gerhard Schroeder.

Steinbrueck's more conciliatory approach on the issue, however, has prompted a similarly less confrontational response from the commission which acts as eurozone financial watchdog.

Germany's budget deficit currently stands at 3.3 per cent of GDP, the fifth year running that Berlin has been in breach of eurozone regulations.

France, Italy and several other eurozone countries have also overshot the pact's 3 per cent of GDP rule. Like Germany, however, all countries have escaped financial sanctions. The pact was revamped last year to make it more flexible.

DPA

Subject: German news

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