Council gives notice to Germany to put an end to its excessive deficit by 2007 - Main contents

C/06/79

Brussels, 14 March 2006, 7320/06 (Presse 79)

The Council adopted today a decision[1], under article 104(9) of the treaty, giving notice to Germany to bring its government deficit below 3% of gross domestic product (GDP), the reference value provided for by the EU treaty, as rapidly as possible and by 2007 at the latest.

Germany's deficit amounted to 3.3% of GDP in 2005, according to the Commission on the basis of provisional data provided by Germany on 24 February.

The German government adopted on 22 February a draft federal budget for 2006 and a draft law aimed at raising the standard VAT rate from 16% to 19% as from 1 January 2007. In the light of this, the Commission expects the German deficit to stay slightly above 3% of GDP in 2006 and to drop clearly below the reference value in 2007.

The Council's decision requires Germany to report to the Commission by 14 July and on four subsequent occasions on measures taken to correct its deficit. It requires Germany to ensure a cumulative improvement in its structural balance of at least 1% of GDP in 2006 and 2007, and an annual reduction in its structural deficit of at least 0.5% after the excessive deficit has been corrected.

The EU's excessive deficit procedure was opened with regard to Germany in January 2003, when the Council adopted a decision under article 104(6) on the existence of an excessive deficit and a recommendation under article 104(7) on measures to correct it.

[1] The decision was taken by the Economic and Financial Affairs Council