The German government will be able to reach a balanced budget in 2006, the finance ministry said today, after the EU set a deadline for the country to begin implementing deficit reforms. Responding to the European Commission's official declaration that Germany had posted an "excessive budget deficit" last year, the ministry said that further reforms will be implemented this year. "The German government has shown in its latest stability programme how a balanced public budget can be reached by 2006," it said.
The Commission has ordered Germany to take steps to trim its deficit - estimated to have hit 3.8pc of GDP last year - by 21 May. Failure by the State to adhere to the procedure laid out by the EU could leave it open to massive fines of up to 0.5pc of GDP. Germany is the second EU country to breach the 3pc limit after Portugal. But Monetary Affairs Commissioner Pedro Solbes has warned that while he expects the German deficit to be reduced, it was not yet possible to assess whether it would fall below the 3pc limit by the end of 2003. "On the basis of current [growth] figures, Germany can achieve the 3pc target, but there are risks," he said today, noting that the forecast was based on an "optimistic" growth forecast. //www.fxcentre.com