German deficit will not fall in 2012, 2013: Bundesbank

19th December 2011, Comments 0 comments

Germany will be able to reduce its public deficit sharply this year, but is unlikely to make further inroads in 2012 and 2013, the Bundesbank predicted on Monday.

"The deficit ratio in Germany should decline sharply to around 1.0 percent this year after rising to 4.3 percent in 2010," the German central bank wrote in its latest monthly report.

Key factors behind the improvement in Germany's public finances include the generally favourable performance of Europe's biggest economy and the resulting increase in tax revenues.

However, the global economic slowdown resulting from the eurozone debt crisis meant that the deficit ratio "will remain almost unchanged" both in 2012 and 2013, even if "a slight improvement in the structural deficit" may be observed, the report said.

According to the government's latest forecasts, the public deficit is set to fall to 1.3 percent of gross domestic product (GDP) in 2011, then to 1.0 percent in 2012 and 0.7 percent in 2013.

The country's overall debt level, which stood at 83.2 percent of GDP last year, way above the 60-percent limit laid down in the Maastricht Treaty, could "plausibly" fall to 81 percent this year, the Bundesbank said.

Nevertheless, while the overall debt ratio would continue to come down in the next two years, "it will nevertheless remain substantially above the reference value of 60 percent," the central bank predicted.

The Bundesbank also said Germany would be able to bring down unemployment only slightly in 2012 and 2013.

"On an annual average, the number of people registered as unemployed is expected to reach around 3.0 million, which is equivalent to a jobless rate of 7.0 percent," it wrote.

"In 2013, the unemployment rate could fall by 0.2 percentage point and the jobless total stand at 2.9 million," it said.

Overall, the Bundesbank reiterated its growth forecasts for next two years.

Following GDP growth of 3.0 percent this year, the economy would expand by only 0.6 percent in 2012 and then by 1.8 percent in 2013, "assuming there is no substantial intensification of the debt crisis," it predicted.

© 2011 AFP

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