Germany’s austerity package and the federal budget: Growth-compatible

Deutsche Bank Research issued in July 2010 a 'Research Briefing' entitled 'Germany's austerity package and the federal budget: Growth-compatible'.

The key conclusions in the briefing were:

+ Germany has presented a four-year consolidation package to reduce its structural deficit and bring cumulative budget relief of over €80bn (65% via spending cuts and 35% via revenue increases).

+ Spending cuts (above all in the labour and social security budgets) will make up the lion's share of the package, whereas tax hikes and subsidy reductions will play a smaller part. Taken together, the spending cuts and revenue increases foreseen for next year will amount to less than 0.5% of GDP. Moreover, the budgets for key growth areas such as education and research will remain unchanged.

+ The package will put larger burdens on airlines, energy utilities, banks and energy-intensive producers, with the proposals still needing to be detailed in draft legislation by the responsible ministries.

+ The government's legislative proposals – presumably in the shape of a budget accompanying law – will not be tabled until autumn at the earliest, with the Bundestag probably also not voting on them until the budget debate. The cabinet's recently adopted draft budget for 2011 and financial planning no doubt already at least specify the totals for revenue increases and expenditure cuts.

ESO: Background information: Schäuble defends German economic stance http://www.europeansources.info/record/schauble-defends-german-economic-stance/

---