4th Feb 2023

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.

Hawkish ECB rate-rise 'puts energy transition at risk'

The European Central Bank raised interest rates by another 0.5 percent to a 14-year high, and expects to hike rates by another half percent in March. But what does that mean for the green transition?

Polish backpedal on windfarms put EU funds at risk

Draft legislation in Poland aimed at relaxing some of Europe's strictest laws surrounding onshore wind-turbines has been derailed by a surprise last minute amendment, which could put Poland back on a collision course with the EU.


More money, more problems in EU answer to US green subsidies

Industrial energy-intense sectors, outside Germany and France, will not move to the US. They will go bust, as they cannot compete in a fragmented single market. So to save industry in two member states, we will kill the rest?

Latest News

  1. Greece faces possible court over 'prison-like' EU-funded migration centres
  2. How the centre-right can take on hard-right and win big in 2024
  3. Top EU officials show Ukraine solidarity on risky trip
  4. MEPs launch anonymous drop-box for shady lobbying secrets
  5. Hawkish ECB rate-rise 'puts energy transition at risk'
  6. MEPs push for greater powers for workers' councils
  7. How Pavel won big as new Czech president — and why it matters
  8. French official to take on Islamophobia in EU

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Join EUobserver

Support quality EU news

Join us