Disciplined Economy
June 5, 2007
Germany received the formal all-clear from all 27 EU finance chiefs on Tuesday, after four humiliating years in which it failed to meet euro-zone deficit criteria.
Faster economic growth helped Berlin bring the budget deficit below the EU limit of 3 percent of gross domestic product. It dropped from 3.2 percent of GDP in 2005 to 1.7 percent in 2006.
Germany is expected to pare its once-excessive budget deficit down to 0.6 percent this year, reaching 0.3 percent of GDP in 2008.
"Impressive" work
EU Economy and Monetary Affairs Commissioner Joaquin Almunia on Monday commended Germany for "impressive" work in coming under the EU ceiling by a very wide margin a year earlier than ordered.
EU finance chiefs are set to discuss easier rules on how value-added tax in the bloc is charged in the course of their meeting. The talks are likely to be arduous, as any decisions must be given the thumbs-up by all 27 governments.
VAT at issue
Germany, which currently runs the rotating EU presidency, blocked the agreement last year, demanding more support for plans on sales-tax fraud which, it argues, eats up several billion euros of its treasury and up to 2.5 percent of GDP from other EU countries.
Ministers will also negotiate changes on how VAT is charged to business and how to simplify cross-border VAT obligations.
Finance chiefs of the 13 countries using the euro currency on Monday were urged to use the booming euro economy and falling unemployment to pay off public debt.
Malta, Cyprus approved for euro
Euro-zone ministers confirmed that Cyprus and Malta have fulfilled the criteria for introducing the euro currency starting Jan. 1, 2008. EU leaders are expected to vote on the requests at a summit later this month.
The meeting of EU finance chiefs takes place ahead of the G8 summit of the world's leading industrialized nations in Germany on June 6 to 8, which is likely to underscore the growing global power of emerging economies as well as a diminishing US dollar.
With the 13-member euro zone predicted to turn in a strong economic performance this year, the European Central Bank this week is likely to raise its 2007 forecasts for euro-zone inflation and growth, with further interest rate hikes expected to be announced Wednesday.