Germany Clips Budget
May 8, 2007
The European Commission said the German budget deficit fell from 3.2 percent of GDP in 2005 to 1.7 percent in 2006, the first time Berlin had managed to bring its budget deficit below the three-percent threshold -- mandated by EU rules -- since 2002.
Officials said Germany's performance in 2006 was much better than expected. The commission had originally said the German budget deficit in 2006 would stand at three percent of GDP.
The commission said the better-than-expected results were due to higher German tax revenues.
Major tax revenues expected
Over the weekend, German Finance Minister Peer Steinbrück announced that he expected an additional 90 billion euros ($120 billion) in tax revenues to flow into the central government coffers over the four years to 2011.
Steinbrück also said that the additional tax take for the whole country -- including the federal government, the 16 states and the local authorities -- could amount to 200 billion euros.
The minister warned, however, that the additional revenue had to be devoted primarily to consolidating the budget after years of running deficits that exceeded of European Union norms.
According to the European Commission, the German budget deficit will fall to 0.6 percent of GDP in 2007, reaching 0.3 percent of GDP in 2008.