The German Bundestag, or lower house of parliament, has recently adopted the government’s 2013 federal budget, providing for a reduction in the pension insurance contribution by 0.7% to 18.9%, and for the abolition of the highly unpopular practice fee.
According to the German finance ministry, the Bundestag’s decision underscores the successful strategy implemented by the government, which has managed to achieve an almost balanced structural budget after three years of consistent fiscal consolidation. This has been achieved by maintaining expenditure at an almost constant level and by using rising tax revenues to reduce the deficit.
Germany’s 2013 budget provides for a structural deficit of EUR8.8bn (USD11.4bn), corresponding to 0.34% of gross domestic product (GDP). This will enable the government to adhere to the debt brake rule at federal level three years earlier than required.
Enshrined in basic law, Germany’s debt brake rule provides for a maximum structural deficit from 2016 of 0.35% of GDP. The government aims to completely eliminate the structural deficit by 2014.
