Germany can meet the EU Stability and Growth Pact's fiscal criteria in 2005 provided its economy grows 2pc in 2004, according to Finance Minister Hans Eichel. "If growth, as it seems, is around two percent in 2004, we will make it [for 2005]," Eichel said in an interview published this morning. The European Commission has threatened to impose sanctions against Germany for failing to reduce its budget deficit below the 3pc of GDP ceiling specified in the pact. Germany, like France, is on course to breach the limit in 2004 for the third year in a row.
Eichel has been arguing that it would be wrong of the EU to fine Germany as the government is taking steps to lower the deficit in 2004, even though it won't meet the 3pc level. The Commission yesterday acknowledged that Germany's deficit would probably not reach 3pc in 2004 from a forecast 4.2pc this year. But it ordered the Government to do more to reduce the deficit and recommended that it cut it by 0.8pc of GDP next year, instead of 0.6pc as planned. //www.fxcentre.com