The European Commission has said an excessive deficit exists in Germany.
The 2002 government deficit in Germany is expected to have clearly exceeded the Amsterdam Treaty's reference value of 3 per cent of GDP.
Government debt at 60.9 per cent also exceeds the respective reference value of 60 per cent of GDP of the Treaty.
The Commission opinion takes up the major findings of the Commission report prepared in November 2002, also taking into account the opinion on that report given by the Economic and Financial Committee on 29 November 2002.
In addition, the opinion states, the excessive deficit in 2002 did not result from an unusual event outside the control of Germany, nor did it result from a severe economic downturn.
Several factors contributed to the excessive deficit in 2002:
- The underlying deficit in Germany had been rising since the year 2000. Growth in 2001 and 2002 turned out markedly lower than originally projected.
- Furthermore, the impact of the corporate tax reform on tax revenues in 2001 and 2002 had been clearly underestimated.
- there were some expenditure over-runs, especially in the health care system.
On forecasts for 2003, the Commission concludes that, while it was clear that the deficit would be reduced, it was not yet possible to assess whether the deficit would come to fall below the 3 per cent of GDP reference value.
Moreover, given that the debt-to-GDP ratio was projected to rise to close to 62 per cent of GDP by the end of 2003, any slippage in budgetary execution would imply an additional deterioration of the debt ratio.
The Commission has called on the German government to "regulate the situation as rapidly as possible" and has given the government until May 21 to cut the deficit.
In addition, the Council recommends the German authorities to ensure that the rise in the debt ratio is brought to a halt in 2003 and reversed thereafter.