The German government sought yesterday to kill off speculation that it was trying to soften European Union budget rules, ruling out even a temporary deviation from deficit targets despite the slowing economy.
The government is sticking to the path of financial discipline laid down in the European Union despite the current economic weakness, it said in a statement.
There will be no temporary deviation from the European (Union) Stability Pact and the goals agreed in it because budget consolidation is a high priority for the federal government, it added.
The statement was issued amid doubts about Germany's commitment to the budget deficit targets it set itself under the EU's Stability Pact, which requires euro-zone members to achieve balanced budgets in the medium term.
It was issued one day after the German finance ministry denied media reports that it wanted to soften the stability pact by moving its emphasis to spending targets rather than budget deficit goals.
The reports were sparked by an off-the-cuff remark by Finance Minister Hans Eichel last week, suggesting spending targets were preferable to budget deficit goals.
Handelsblatt newspaper reported on Monday that France and Germany were agreed on the need for such a move. But the French finance ministry also denied yesterday that such plans existed.
German Finance Minister Hans Eichel and French Finance Minister Laurent Fabius are due to hold regular talks in Berlin on August 31st.
Germany's deficit is widely expected to overshoot the government's official goal of 1.5 per cent of gross domestic product, agreed with its EU partners. Germany's central bank, the Bundesbank, said last week it could even exceed 2 per cent.
But in its statement, the government gave no indication it would revise its targets, which the finance ministry previously said would be reviewed as normal in November.
The statement noted, however, that EU budgetary policy allowed for short-term deviations from preset goals.
The finance ministry already said in April that a final deficit outturn of 1.7 per cent would be within a margin of error surrounding the 1.5 per cent goal and be compatible with it.
