18 April 2012

Germany adopts 2012 Stability Programme

The Stability Programme shows clearly that Germany will fully comply with all of the general government fiscal policy requirements laid down by the EU. Germany’s growth-orientated consolidation policy is making a crucial contribution to the stability of the European economic and monetary union.

Already as of 2012, Germany will be able to meet its medium-term budgetary objective of a structural deficit no higher than 0.5 per cent of GDP and will thereby comply with the preventive requirements of the Stability and Growth Pact. The structural balance will continue to improve in the coming years. This will lead, from 2014 onward, to balanced budgets at more than just the general government level. In 2014, the federal government’s structural new borrowing will fall below the new ceiling that actually does not apply until 2016 – namely, 0.35 per cent of GDP.

The debt ratio – which rose sharply from 2008 onward due to the stabilisation measures taken in response to the financial and European sovereign debt crisis – will decline markedly as well: from 82 per cent of GDP this year to 73 per cent of GDP by the end of the Stability Programme’s timeframe in 2016.

The preventive arm of the Stability and Growth Pact requires each Member State to set a medium-term budgetary objective under which that State’s structural deficit does not exceed a maximum ceiling of up to 1 per cent of GDP. The structural deficit is the actual deficit adjusted for cyclical and one-off effects. Germany will meet its medium-term objective of a structural deficit no higher than 0.5 per cent of GDP as early as 2012, and the structural balance will continue to improve in the years ahead.

In December 2009, the ECOFIN Council determined that Germany was running an excessive deficit and called for the deficit to be reduced by 2013. All levels of government have contributed to the reduction of the general government deficit ratio by consolidating their budgets – in some cases quite considerably. While the Federation and Länder still posted deficits despite significantly improved balances, municipal governments and in particular social security funds achieved surpluses.

Germany had already significantly improved its financial balance in 2011 when it reduced its general government deficit by 3.3 percentage points to 1.0 per cent of GDP. Thus already last year Germany returned to compliance with the financial balance requirements set out under the Stability and Growth Pact’s corrective arm. This also meant that Germany fulfilled its voluntary commitment under last year’s Euro Plus Pact, namely that it would bring its deficit below the 3 per cent threshold two years earlier than required under the excessive deficit procedure. 

The various levels of government will contribute to the medium-term balancing of budgets by maintaining their consolidation policies throughout the entire projection period. Strict compliance with the debt brake that took effect in 2011 is also playing a decisive role in improving budget performance at the federal level.

Press release

2012 Stability Programme

© Bundesfinanzministerium