Germany Risks Deficit Breach in 2005

Germany risks running foul of the EU's tight budget rules again next year, even if Berlin insists it will be able to meet its deficit commitments in 2005, the Bundesbank warned on Monday. The German public deficit breached a key EU limit of 3 percent of gross domestic product (GDP) both in 2002 and 2003 and is expected to do so again this year, contrary to rules of the European Stability and Growth Pact. And while Berlin has pledged to bring its deficit ratio back below 3 percent next year, many observers remain sceptical that it will succeed. "Despite expectations for a fall in the deficit, there is a substantial risk that the 3 percent limit will be exceeded again next year," the German central bank wrote in its November monthly report published Monday. Earlier this month, the government unveiled a package of additional measures aimed at ensuring the deficit ratio is cut to 2.9 percent in 2005. But most of the measures were simply one-off measures "that will burden future budgets," the Bundesbank complained. (AFP)