Thursday

20th Feb 2020

Germany's budget deficit rises to 4 percent

New figures released on Tuesday (24 August) show that Germany is on course to breach the EU's strict budget rules for the third year in a row. Its public deficit soared to four percent of gross domestic product in the first six months of this year.

The German government had already predicted a budget deficit of 3.5% for this year, the third year in a row that it has exceeded the 3% limit set by the EU's growth and stability pact.

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  • (Photo: European Commission)

A separate report from the Federal statistics office showed that German economic growth has picked up in the second quarter, driven by strong demand for exports.

The German economy grew by 0.5% in the three months to the end of June from the previous quarter.

Exports rose 3.2 percent from the first quarter, while domestic demand unexpectedly fell 0.1 percent in the same period, reports Bloomberg.

The statistics also show that there was only a small increase in private and public consumption in Europe's largest economy and that there was a decline in construction and capital investment.

Bank of France

Meanwhile, the Bank of France is seeking restrictions on exceptional budgetary measures that member states use to reduce their public deficits, according to AFP

In its August monthly bulletin, the central bank called for "an improved framework on exceptional budgetary measures".

The central bank warned that use of exceptional measures "cannot substitute for efforts in budgetary structural reform ... in fact only delays them several years, at the risk of giving the illusion that the deterioration of the public finances is being limited and to make, in this situation, the unavoidable adjustment more difficult to the countries concerned".

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As EU budget negotiations enter a nasty phase, EU council chief Charles Michel tries to please two divided groups of member states, but Austria's Sebastian Kurz has warned net payers cannot be pushed for more.

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