German deficit hits three-low low

1st September 2011, Comments 0 comments

Germany, Europe's powerhouse economy, announced on Thursday a drop in its public finance deficit to 0.6 percent during the first half of the year, the lowest level since early 2008.

As eurozone partners work on ever tighter austerity plans to balance their books, Germany -- which underwrites a large share of their rescue packages -- is now well ahead in strenghtening its finances.

It has made big progress despite heavy spending on stimulus programmes over the past two years to offset the worst recession since 1945.

The government expects a 1.5-percent public deficit for this year and hopes to break even in 2014.

However, other official data also indicated that Germany is paying a price on its trade balance for its decision eventually to abandon nuclear energy.

The latest deficit figure of 0.6 percent compares to a 3.1-percent deficit in the first half of 2010 and to a 5.4-percent deficit in the second half of 2010, according to Destatis, the federal office of statistics.

Destatis also confirmed a meagre 0.1-percent expansion of the country's gross domestic product in the second quarter, suggesting this was partly due to increased energy imports resulting from Germany's nuclear energy freeze.

The lower deficit figure was due to a 6.0-percent increase in tax revenues compared to tax income in the same period last year, and to slower spending which increased by just 0.3 percent compared to expenditure in the first half of 2010, Destatis said.

This compares to an overall 2010 deficit figure of 4.3 percent, up on previous estimates, because of the need to account for debts held by state-controlled "bad bank" Hypo Real Estate, Destatis said.

Exports were up 1.3 percent in the second quarter of this year, Destatis said, while imports were up 3.2 percent over the same period.

"Germany's decision to abandon nuclear energy has had a noticeable impact" on imports, Destatis said.

Angela Merkel's government ordered the immediate closure of the country's seven oldest nuclear reactors in the wake of Japan's massive March earthquake and tsunami which knocked out cooling systems at the Fukushima Daiichi nuclear plant, causing reactors to overheat and radiation to leak.

This resulted in Germany becoming a net importer rather than exporter of electricity, Destatis said.

The German parliament has voted to close all remaining nuclear plants over the coming decade.

Private consumption, up by 0.2 percent, remained weak over the second quarter because of higher energy prices and concern over the global financial crisis, the statistics office also said.

The government and the German central bank are still banking on economic growth of 3.0 percent this year.

© 2011 AFP

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