Brussels, 19/07/2006 (Agence Europe) - Germany is “on track to correct its excessive deficit by 2007at the latest,” said the European Commission on 19 July, as we had previously anticipated. It felt, then, that there was no need for further steps in the deficit procedure opened in 2003. The Ecofin Council is expected to approve this view on 10 October. If the forecasts are met, the excessive deficit procedure could be stopped towards the end of 2007. “After four years breaching the Stability and Growth Pact, Germany is finally on tract to correct its excessive budget deficit,” said economic affairs commissioner Joaquin Almunia.
On 14 March, the Ecofin Council gave Germany four months to bring forward corrective measures enabling it to reduce its deficit to less than 3% of GDP by the end of 2007. The Commission believes that “if fully implemented and effective, (the package of measures adopted in late 2005) would ensure that the deficit falls below 3% of GDP reference value by 2007”. Berlin promised to reduce its public deficit in 2007 to well below 3%, forecasting 2.5%. The government does not rule out being able to do so in 2006, although its official forecast for this year is 3.1%, figures deemed credible by the Commission. It says that the three point VAT rate rise (from 16 to 19%) will make a significant contribution to the reduction of the deficit, even though “this will be partly offset by the reduction in the overall rate for social contributions”. The Commission also welcomes the reduction in Germany's public expenditure.