Thursday

25th Feb 2021

Germany set to break euro rules until 2010

IMF experts have suggested Europe's biggest economy is set to break the eurozone deficit limit until 2010.

The Washington-based International Monetary Fund unveiled the remaining chapters of its World Economic Outlook report on Wednesday (21 September).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The document reflected the Fund's pessimism over Europe's growth, cutting its GDP forecasts to 1.2 percent for 2005 and 1.8 for 2006.

It also suggests the German deficit will remain above 3 percent until 2010, meaning the country will not be able to comply with the Stability and growth pact, the rules underpinning euro.

The experts predict Germany's deficit to reach 3.9 percent this year, and it is estimated at 3.2 percent in 2010.

The main factor behind the gloomy picture is the country's sluggish economic growth, although it may be improved as a result of the Agenda 2010 economic reforms initiated by the previous red-green government.

According to Raghuram Rajan from the IMF, reforms creating more labour supply could now be "taken to their logical conclusion" by "increasing the incentives for corporations to actually hire more people, for example by reducing some of the regulatory burden on them, reducing the extent of payroll taxes, and so on".

Mr Rajan added these steps could "be done by the new (German) government, whoever it is", at a press briefing following the launch of the report on Wednesday (21 September).

But he suggested politicians should do better in explaining the reasons for changes that need to be carried out in Europe, where the main problem remains weak domestic demand.

European citizens "do not seem convinced the bitter medicine of continued structural reforms will cure the stasis that afflicts much of the continent", Mr Rajan pointed out.

"It is a failure of politics that people have not come to see that the more they want to retain the attractive European way of life, the more the way they work will have to change", he added.

IMF pessimistic about Europe's economy

The International Monetary Fund has lowered its expectations for the EU’s economic prospects, cutting the growth forecasts for four big countries – Germany, France, UK and Italy - while presenting a more optimistic outlook for the US and Japan.

Luxembourg tax scandal may prompt EU action

An investigation into Luxembourg's tax regime has uncovered how the Italian mafia, the Russian underworld, and billionaires attempt to stash away their wealth. The European Commission has put itself on standby amid suggestions changes to EU law may be needed.

Investigation

Portugal vs Germany clash on EU corporate tax avoidance

Portugal's taking over the EU presidency puts the tax transparency law for corporations - which has been fought over for years - to a vote in the Council of Ministers. The resistance of the German government has failed.

News in Brief

  1. Armenian prime minister denounces 'coup' attempt
  2. UK warns EU against escalating City-of-London battle
  3. Brussels mulls extending data-roaming regime for 10 years
  4. Full list of European firms US forced to ditch Russia pipeline
  5. French diplomat calls Johnson 'inveterate liar'
  6. French town's switch to vegetarian meals prompts backlash
  7. Police seize 23 tonnes of cocaine in Europe's biggest haul
  8. WHO Covax programme delivers first vaccines to Ghana

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance
  2. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  3. CESIKlaus Heeger and Romain Wolff re-elected Secretary General and President of independent trade unions in Europe (CESI)
  4. Nordic Council of MinistersWomen benefit in the digitalised labour market
  5. Nordic Council of MinistersReport: The prevalence of men who use internet forums characterised by misogyny
  6. Nordic Council of MinistersJoin the Nordic climate debate on 17 November!

Latest News

  1. Who are the EU's new Russian deplorables?
  2. Afghan asylum family beaten in Greece, set adrift at sea
  3. EU leaders face Covid-mutations dilemma at summit
  4. EU sets out plan to mitigate 'unavoidable' climate events
  5. Questions for Germany on EU's Russia strategy
  6. Greenland's snap election exposes global mineral demand
  7. Covid-19 certificates back on EU leaders' agenda
  8. Ethiopia war creating new 'refugee crisis', EU envoy warns

Join EUobserver

Support quality EU news

Join us