Deficits

Germany is not doing very well. Again. The “Five Wise Men” a.k.a. the government’s independent economic advisers have come up with a gloomy prediction. GDP growth is now expected to be 1.4 per cent as opposed to the previously predicted 1.8 per cent and the deficit in 2005 will, once again, be higher than the required 3 per cent.

The problems cited are the strong euro (already mentioned in our blog) and low domestic consumption, in itself a sign of economic malaise. This means that the little growth there is has to be fuelled by exports, made more difficult by the relatively strong euro.

The worrying economic situation and the rising problems with public finance make it extremely unlikely that Germany will agree to any increase in the members’ contribution to the EU budget, already asked by the incoming Commission, under its supposedly free-marketeer President.

And speaking of deficits and countries that would like to be in receipt of those higher contributions, Greece has now officially admitted that, to quote its Finance Minister, Giorgios Alogoskoufis,

“It was proven that for no year, from 1999 on, and afterwards, the deficit had fallen below three percent [of gross domestic product].”

Commission officials do not think that this consistent inaccuracy has put Greece’s membership of the euro in doubt. Well, why should it? After all, there were a few problems with some of the other countries that were keen to join.

In the meantime, Greece has promised to halve its deficit next year (had they not promised that before?) and a spokesman for Economics and Monetary Affairs Commissioner Joaquin Almunia has confirmed that they would be recommending that the Barroso Commission start infringement proceedings as soon as possible.

Plus ça change, plus ça reste la même.