Government austerity package signals sustained fiscal tightening ahead
- On 7Jun German chancellor Merkel announced a package of budget cuts worth €80 bn through to 2014, which would amount to an annual deficit reduction by 0.8% of GDP
- The package is supposed to be back loaded, with the bulk of the measures starting from 2012. Next year`s cuts will be relatively modest at 0.4% of GDP.
- Most of the cuts will be through spending cuts, taxes on nuclear power, aviation and banking being the key exceptions.
- Since the package is regarded as a first draft this piece gives a brief overview of the content and the potential effect of the measures.
Asset conclusions: German austerity package sets a strong signal in favour of fiscal restraint, implying wider bond spreads and helping stabilise the euro.
Please see attached analysis from Michael Clauss. Simply read the full report onscreen or print from the pdf.
For further information please contact:
Dr Michael Clauss: Politics / Economy / Equities Sectoral Analysis
Tel: +49 89 64254046
michael.clauss@eurozoneadvisors.com
© Eurozone Advisors Ltd
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