Balancing the books

Germany appeared to be back on top as Europe's powerhouse economy on Monday after it announced that it cut this year's estimated budget deficit from 2.5 percent to 1.5 percent.

Monday's reduction more than halved the 2010 deficit which stood at 3.3 percent.

According to a report published by Germany's Finance Ministry public finances will now be balanced sooner than expected.

"The positive development this year will continue until 2015, which will allow us to balance the accounts in 2014," the ministry said in a monthly report published on its website.

Germany previously aimed to balance its finances by 2016 under a law aimed at preventing the government from overspending.

By 2015 Germany forecasts public debt equivalent to 71 percent of GDP, down from 83.2 percent in 2010.

Positive sign

Germany's Finance Minister Wolfgang Schäuble hailed the endurance of the German economy on Monday, asserting that it was not heading towards a double-dip recession.

There were "no signs of a recession in Germany," he told public radio Deutschlandfunk . "There is no reason to worry," he said, adding that the economy was expected to grow around three percent in 2011.

The German central bank also maintained its three percent growth forecast for 2011 in its August report.

But according to figures released last week, growth in Europe's biggest economy slowed sharply in the second quarter of 2011. This added to fears that the global recovery is losing momentum as EU leaders struggle to get a grip on eurozone debt.

Analysts have warned that a sharp slowdown in German growth would have serious repercussions elsewhere in the eurozone.

Author: Charlotte Chelsom-Pill (AFP, Reuters)
Editor: Rob Turner