Germany slashes gap on growth, low jobless rate

FRANKFURT - Agence France-Presse

A worker flattens a walkway next to the construction site of the new headquarters of the European Central Bank (ECB) in Frankfurt, last month. Germany, the engine of the European economy, shrank 0.2 percent in the last quarter of 2011, official figures show. REUTERS photo

Robust growth and record low unemployment enabled Germany, Europe’s biggest economy, to slash its public deficit last year, despite economic contraction in the last quarter, data showed on Feb. 24.

The German public deficit covering budgets for central government, social services and local government, fell to 1 percent of gross domestic product in 2011 from 4.3 percent in 2010, a huge reduction by any standards and highlighting Germany’s strong stature in the eurozone debt crisis.
The public deficit -the gap between revenue and expenditure- amounted to 25.3 billion euros ($33.8 billion) in 2011, the national statistics office Destatis calculated in a statement.

A year earlier, it had stood at 105.9 billion euros.

The 17 countries that share the euro are not supposed to run up deficits in excess of 3 percent of GDP, but the last time the German deficit ratio was below that ceiling was in 2008 when it stood at 0.1 percent.

Destatis said that revenues amounted to 1.148 trillion euros last year while expenditure stood at 1.173 trillion euros, against total GDP of 2.57 trillion euros.

The federal government and the regional governments of Germany’s 16 states spent more than they received in revenues last year, running up deficits of 26.3 billion euros and 14.9 billion euros respectively, Destatis calculated.

By contrast, the municipal authorities ended the year with a modest budget surplus of 0.8 billion euros and the social welfare system achieved its biggest budget surplus of 15.1 billion euros since unification in 1991 thanks to the favorable situation on the labor markets, the statisticians said.

Germany has managed to shrug off the worst of the eurozone debt crisis thanks to deep structural reforms implemented in recent years, notching up robust growth of 3 percent last year, while unemployment fell to record lows.

Crisis not over
Nevertheless, the sovereign debt crisis has not left Germany totally unscathed and growth shuddered to a halt at the end of the year, even if economists and officials believe it will quickly pick up again
this year.

Already last week, official data showed that GDP contracted by 0.2 percent in the period from October to December. According to a breakdown of the growth data published by Destatis on Feb. 24, the contraction in activity was mainly due to a 0.8-percent drop in exports, traditionally the main driver of growth in the German economy. Consumer spending also declined slightly by 0.2 percent, while state spending was up fractionally by 0.1 percent.

Only investment increased perceptibly in the three-month period, with construction investment up as much as 1.9 percent, the statisticians calculated.