Germany set to breach eurodeficit rule for fourth time
12 May 2005, BERLIN - Germany looks likely to violate the eurozone's budget deficit rule for a fourth year in a row after Finance Minister Hans Eichel on Thursday announced far bigger than expected tax revenue shortfalls through 2008.
12 May 2005
BERLIN - Germany looks likely to violate the eurozone's budget deficit rule for a fourth year in a row after Finance Minister Hans Eichel on Thursday announced far bigger than expected tax revenue shortfalls through 2008.
The German state is likely to have a EUR 66.8 billion revenue shortfall through 2008, said Eichel at a news briefing announcing the government's latest tax income projections.
"An overall precarious financial situation," was how Eichel described the worsening fiscal data.
Up until now the German government had predicted an already high EUR 54 billion shortfall through 2008.
German tax revenue deficits are now expected to total EUR 5.1 billion in 2005, EUR 17.1 billion in 2006, EUR 21.3 billion in 2007 and EUR 23.3 billion in 2008, said a finance ministry statement.
Despite the bad news, Eichel did not announce any spending cuts or other moves to reduce Germany's growing debt. He rejected as "damaging" short-term emergency measures.
Germany has overshot the eurozone's 3 percent of GDP budget deficit limit for the past three years and Eichel admitted Berlin was now in danger of doing so again in 2005.
"It will be more and more difficult," said Eichel, adding: "We will try."
The gloomy news comes as Chancellor Gerhard Schroeder's government is battling to win re-election in North Rhine-Westphalia state.
Schroeder's Social Democrats (SPD) are badly trailing opposition conservatives in the run-up to 22 May elections in Germany's most populous state which has been ruled by the SPD for almost the past four decades.
Defeat in North Rhine-Westphalia would be a grim omen before autumn 2006 general elections in which Schroeder is seeking a third term.
Seeking to put a positive spin on events, Eichel underlined data released earlier on Thursday showing the German economy grew by 1 percent in the first quarter of this year.
Analysts expect German GDP to grow between 0.8 and 1 percent in 2005 - but the figure may be revised upwards following the latest positive growth projection.
Minister Eichel predicted Germany was headed for 1.6 percent growth in 2006 and 1.8 percent growth from 2007 to 2009.
Subject: German news