Germany – No economy is perfect

Budget deficit

  • 2008    balanced
  • 2009 – 3.3% of GDP
  • 2010 – 5.8% of GDP predicted by OECD

Germany breeched the 3% GDP Maastricht Treaty Growth and stability pact previously in both 2004 and 2005 by a maximum of 1%

German government is a coalition of Free Democrats (FDP) and Christian Democratic Union (CDU)- In Irish terms PD and FG/FF

The FDP want tax cuts and reform by 2011

The CDU want spending cuts before any tax cuts

The 2009 deficit comes from the car scrappage scheme, increased spending on infrastructure, research and development, increased child allowances and commuter subsidies and a drop in tax revenues.

German unemployment has bee held down by subsidies for short term work; by employer/worker agreements to hold down wages and work fewer hours in the hope of a quick economic recovery. Subsidies for short term working cost less than full unemployment.

Germany runs a current account surplus of €80 billion about half due to eurozone trade. Where as Greece, Italy, Spain and Portugal run current account deficits totalling 102 billion in 2009 about half due to eurozone trade. If the Clubmed countries deflate their way to Maastricht levels, there will be huge deflation and this will affect German exports so it is likely that the Germans will organise a Greek bailout by some means.