“The European Commission’s Annual Growth Survey and
subsequent ECOFIN Consultations, have agreed to make clear that fiscal
consolidation is an essential condition to return to higher growth and
employment. All Member States should continue to respect their commitments
under the SGP (German Stability Program) which allow the automatic stabilisers
to work around the agreed path of structural fiscal adjustment, while ensuring
the long -term sustainability of public finances. Member States that are part
of an assistance programme and under pressure from financial markets should
meet agreed budgetary targets and, if necessary, stand ready to pursue further
consolidation measures. As part of the consolidation strategy, priority is to
be given to future investments, in particular in regard to education, research
and innovation. The efficiency
and effectiveness of the tax system should be reviewed, and it has been suggested
that the tax base should be broadened, unjustified
exemptions abolished and taxes should be shifted away from labour.”
German debt per GDP, is not on a very high
proportion, if you look at Greece for example, its percentage of debt per GDP
is much higher although the actual money debt might seem less to a not trained
economist. The latest fiscal policy applied by the German Government I a contractionary
policy. A fiscal policy is changes in the levels of taxation and government
spending meant to expand or contract the level of aggregate demand in a nation
to promote macroeconomic objectives such as full employment, stable price and
economic growth. A contractionary fiscal policy, the one which I believe has
been adopted by Germany, occurs If the government reduces its spending and / or
increases the level of taxation, aggregate demand will decrease and shift to
the left. This would help diminish their country debt per GDP.
