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The Week in Germany: Business and Technology

May 11, 2007

EU Lifts Eurozone Growth Forecast on Expectations of Strong German Performance

The European Commission on Monday (7 May) lifted its 2007 growth estimate for the 13 nations sharing the euro to 2.6 percent from a February forecast of 2.4 percent on expectations of strong German performance.

The forecast means that the eurozone would be the fastest growing economy in the developed world, with US growth estimated at 2.2 percent and Japan at 2.3 percent.

It would also mark only a marginal slowdown from 2006, when the euro zone grew 2.7 percent - its fastest pace of growth since the peak of the dot.com bubble at the turn of the decade.

The European Union's executive arm estimated in its semiannual update of its official economic forecasts that the broader EU economy would grow even more quickly this year than in the euro zone.

It estimated that the 27-nation economy would expand 2.9 percent, raising its projection from a forecast of 2.7 percent in February.

Sharply stronger-than-expected growth in Germany boosted the overall outlook with Europe's biggest economy forecast to grow 2.5 percent this year, up from a previous forecast of 1.8 percent.

"The European Union and the euro area remain on a brisk growth path that should reduce the unemployment rate and the average public deficit further to levels not seen in a long time," said EU Economic and Monetary Affairs Commissioner Joaquin Almunia. (Deutsche Welle)

German Budget Deficit on Downward Track

Germany's efforts to put its financial house in order are paying off, with the country expected to pare its budget deficit down to 0.3 percent of gross domestic product (GDP) in 2008, the European Commission said on Monday.

The Commission, the EU's executive body, as well as financial watchdog, said the German budget deficit fell from 3.2 percent of GDP in 2005 to 1.7 percent in 2006, the first time Berlin had managed to bring its budget deficit in line with the European Union threshold of 3 percent of GDP since 2002.

Officials said Germany's performance in 2006 was much better than expected. The Commission had originally said the German budget deficit in 2006 would stand at 3 percent of GDP.

The Commission said the principal contribution to the better outturn came from increased German revenues and direct taxes which yielded substantially stronger revenues than the growth in the tax base would have suggested.

According to the Commission, the German budget deficit will fall to 0.6 percent of GDP in 2007, reaching 0.3 percent of GDP in 2008. (dpa)

Links:

Five Years of the Euro - More Euros than Dollars in Circulation for the First Time Ever (TWIG, Jan. 5, 2007)

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