The new year will probably be worse than the last, but Germany, Europe’s biggest economy, should be able to withstand it, German Finance Minister Wolfgang Schaeuble said in an interview yesterday.
“2012 will probably be more difficult than 2011, but the German economy is in good shape,” Schaeuble told the mass-circulation daily Bild.
The minister urged eurozone countries to “do their homework ... consolidate their budgets and push through the necessary reforms” to resolve the long-running debt crisis.
The bailout mechanisms put in place by member states “can only buy time for states to take the necessary measures and win back confidence,” Schaeuble added.
In a separate interview with the Berlin regional daily Tagesspiegel, the head of Germany’s central bank, Jens Weidmann, also warned Berlin not to ease up on its budget consolidation efforts and called on Germany to set an example for the rest of Europe.
“As an anchor of stability in monetary union, Germany bears a very special responsibility,” said Weidmann, who is a member of the European Central Bank’s -governing council.
“Germany must not ease up on its efforts” to achieve a balanced budget, Weidmann said.
“The proposed pause in consolidation this year is unconvincing given the growth outlook,” he said. “Germany should set an example.”
The German budget deficit is estimated to have reached 20 billion euros (US$26 billion) last year, lower than expected thanks to the past two years of strong economic growth. However, it could rise again to 26 billion euros this year.
The Bundesbank president said that decisions taken by European leaders last month to anchor budget stability in the European treaties was a “useful contribution” to resolving the debt crisis.
“But the agreements should not just remain on paper. They must be put into effect and by every single member state,” he said.
Separately, Spain’s public deficit for last year might be even higher than the 8 percent of GDP forecast by the new center-right government on Friday, Spanish Economy Minister Luis de Guindos said yesterday.
The target was 6 percent of GDP, but the conservatives said last week that had been missed, giving it a mountain to climb to hit this year’s already tough deficit-reduction goals in an economy on the brink of recession.
“We’ll need to see, but it’s possible that we have gone over the 8 percent mark, though expect that it hasn’t done so by much,” Guindos said during an interview with Cadena Ser radio, his first since taking the post after the conservatives won the November election.
The economy might contract in the first quarter of this year after shrinking for the previous three months, he said, reflecting analyst expectations that the Spanish economy is already in recession.
The new government decreed new tax hikes on Friday worth an estimated 6 billion euros a year and spending cuts worth 8.9 billion euros, with which it aims to reduce the deficit by 1 percentage point in the short term.
Measures to balance the public accounts will be accompanied by structural reforms to help restart the stalled economy, Guindos said.
“The government has a very aggressive reformist agenda for the next few weeks and months, in the labor market, the financial system, in the goods and services markets and competitiveness,” he said.
The austerity measures announced last week are the first of many, Spanish Deputy Prime Minister Soraya Saenz de Santamaria said. The government must find savings worth more than 35 billion euros this year to meet the deficit goal of 4.4 percent of GDP.