Updated stability programme of Germany, 2005-2009 - Main contents

EN

Official Journal of the European Union

C 82/6

On 14 March 2006 the Council examined the updated stability programme of Germany.

GDP growth in the last ten years was 1,4 % p.a., trailing the euro-area average by more than half a percentage point. The growth potential has been steadily declining throughout this period. Activity, while being driven by buoyant exports, was held back by sluggish domestic demand. From an extended stagnation in the early part of the decade, demand and real GDP peaked shortly in 2000 and also in 2004, but weakened again thereafter. With employment creation also subdued, the unemployment rate rose to 9,5 % of the labour force. The general government deficit breached the 3 % of GDP Treaty reference value for the fourth consecutive year in 2005. Public debt, having been close to 40 % of GDP in 1991, has been exceeding the 60 % of GDP Treaty reference value since 2002.

On 21 January 2003, the Council decided that an excessive deficit existed in Germany, and recommended, based on Article 104(7), that the excessive deficit be corrected by 2004. In its Communication to the Council of December 2004 on ‘the situation of Germany and France in relation to their obligations under the excessive deficit procedure following the judgement of the Court of Justice’, the Commission concluded that 2005 should be considered as the relevant deadline for the correction. In January 2005, the Council concurred with this view. On 14 March 2006, the Council decided to give notice to Germany in accordance with Article 104(9) to take measures to remedy the situation of excessive deficit by 2007. In its opinion of 17 February 2005 on the December 2004 update of the stability programme, covering the period 2004-2008, the Council invited Germany: to do the necessary to ensure the correction of the excessive deficit in 2005; to implement budgetary adjustments in the years beyond 2005 and make the necessary effort in structural terms to achieve a budgetary position of close to balance by the end of the period covered by the programme; and to continue with structural reforms in order to further improve the long-term sustainability of public finances in particular as regards the health care system.

According to data provided by Eurostat, the general government deficit in Germany amounted to 3,3 % of GDP in 2005. These data, pending a further assessment of their quality, are based upon a provisional notification from Germany pursuant to Council Regulation (EC) No 3605/93, which Germany submitted to the Commission on 24 February 2006. The previous update of the stability programme had set a target of 2,9 % of GDP for 2005.

The German stability programme update was submitted on 22 February 2006. The programme covers the period from 2005 to 2009. The programme broadly follows the model structure for stability and convergence programmes specified in the new code of conduct (2).

The macroeconomic scenario underlying the programme envisages that real GDP growth will pick up from 0,9 % in 2005 to 1,4 % in 2006, with domestic demand gaining momentum. After a slowdown to 1 % in 2007, growth is set to resume thereafter, yielding an average growth rate of 1...