ECONOMY

Germany wants its EU contribution out of deficit calculation

BERLIN (Reuters) – Germany stepped up a campaign yesterday to strip its multi-billion-euro payments to Brussels from calculations on European Union deficit rules it breaks, but it ran into a veto from Commission President Jose Manuel Barroso. Finance Minister Hans Eichel said the European Union should subtract 0.5 percentage points from Germany’s budget deficits in the future to reflect its net contributions of nearly 10 billion euros Berlin makes each year to Brussels. «We want a new valuation for our expenditures to the European Union so that Germany won’t be punished for payments to the EU when deficits are calculated – because that isn’t fair,» Eichel told Der Tagesspiegel newspaper in Berlin. Germany, the largest contributor to the 25-nation EU, has breached the EU’s Stability and Growth Pact rules for the last three years. «If Germany’s deficit is 3 percent (of gross domestic product), one should include in that valuation the 0.5 percent of our GDP that is transferred to Brussels,» Eichel said. Eichel has said German federal, state and local authorities had committed to keeping the deficit below 3 percent of GDP in 2005. He expects the 2005 deficit to be 2.9 percent of GDP. The Bundesbank said in a recent report that there was a «considerable risk» Germany’s deficit would breach the Stability Pact for a fourth year in a row. Barroso told another German newspaper he was opposed to rewriting the EU’s budget deficit rules for Germany’s sake. Last week he had signaled he was open to German, Italian and French pressure for more flexible EU rules on budget discipline. «If we start taking individual items out of the calculations, we don’t know where that will end,» he told Bild am Sonntag. «We would soon end up not having any Stability Pact any more.» The previous Commission suggested loosening some elements of the rules to make them more growth friendly, for example, redefining circumstances under which countries that break its deficit cap might escape disciplinary action. Countries in breach of the rules, including France and Germany, have added their own demands, such as stripping out areas of spending from deficit calculations. Eichel, who put forward a 2005 budget last week that halves new borrowing to 22 billion euros with record privatization revenues of 17 billion euros, said he did not want the changed EU deficit calculation rules to increase spending at home. «We’re not making these efforts in Brussels to strip any expenditures out of the deficit calculation so that we can go out and make new debts,» Eichel said.