It’s a tale of two key world economies, both in Europe but which sees one country balance its books for this financial year while the other says austerity measures will run until 2017.
The first country is Germany, a eurozone stalwart, which has announced that it has balanced its budget, as laid out in the European Union’s Maastrict Treaty, and which comes a year ahead of schedule.
Lower federal borrowing and a steady stream of tax revenues have led to the target being reached despite the long running eurozone crisis, the creation of the controversial bailout fund and strengthening of the European Investment Bank. These issues and paying for the European Stability Mechanism have cost the country £8 billion.
The other country is Britain, where Chancellor George Osborne revealed in his mini budget statement that his economy recovery plan is going to take longer. About two years longer until the 2017 Parliament.
The announcement was made after he revealed the country has missed several key austerity targets to reduce the government’s budget deficit.
UK has Europe’s second largest deficit
Osborne said growth had been stymied because the government inherited the largest deficit ‘since the Second World War’ because of the 2008-2009 financial crisis and Labour’s pre-crisis increases in public spending.
Despite the progress already made, the UK has the largest deficit in the European Union after Ireland.
Only the USA and Japan have larger deficits among the world’s G7 leading economies.
It’s not all bad news for the UK’s economy as the OECD notes that the government’s efforts have restored confidence in financial markets.
However, Mr Osborne blames a lot of the country’s woes on the eurozone crisis which have hampered his efforts to improve the UK’s GDP and cut the deficit.
Zero deficit in Germany
But that claim doesn’t sit so well with Germany’s announcement this week – and they are the leading eurozone economy.
A spokesman for the German finance ministry said: “It can be assumed that the deficit this year will be completely eliminated, it is already at zero. This means that the state budget is balanced already this year.”
There is a federal deficit for 2012 but it is lower than forecast.
The net federal borrowing figure for this year will be £20 billion rather the previous estimate of £22.6 billion.
Germany’s performance is being put down to low unemployment and rising tax revenues.
The finance ministry also pointed out that its deficit-to-GDP ratio will be 0.5% this year which is below the 3% target set in the Maastrict Treaty.
