This is just in from the FT:
Germany recorded a budget deficit of 3.3 per cent of gross domestic product last year, one point more than the most recent forecasts, but still well below the level for most of Europe’s larger economies.
According to the figures released by the Federal Statistical Office on Wednesday, it is the first year since 2005 that Germany has breached the Maastricht stability and growth targets, intended to keep deficit spending by European Union members to less than 3 per cent.
However, the outcome is more likely to be criticised by other EU members for demonstrating how tight a rein Germany has kept on public spending in the midst of the current economic crisis.
As I mentioned before, it was the Germans and the French breaching the magic 3% deficit hurdle which gave all comers a green light to do so. In a depression, as we now have in Spain, Ireland and Greece, it is completely understandable that deficits would be the order of the day. We now see that even the Germans can’t keep below the SGP hurdle. The SGP is a joke and completely unworkable.
I think the real problem is excessive deficit spending during economic expansions. If the Eurozone wants to rein in large deficit spending during economic expansions, they’ll need to choose another mechanism. And remember, Spain’s problems are very much related to its current account deficit. for every current account deficit, there is a current account surplus. Germany’s surplus is as big a problem as Spain’s deficit. Spain, in particular, wouldn’t have as large a deficit if Germany didn’t have as large a surplus – or if the ECB’s monetary policy had been more appropriate for economic conditions in Spain instead of Germany.