{
  "title": "Public Information Notice: IMF Executive Board Concludes 2008 Article IV Consultation with Germany",
  "publication": "IMF News, January 22, 2009",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0905",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0905",
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  "summary": "Each Public Information Notice contains a background section, a table of selected economic indicators, and an Executive Board assessment.",
  "publishDate": "2009-01-22",
  "sections": [
    {
      "heading": "Background: growth, financial stress, and fiscal outlook",
      "content": "- Real GDP:\n  - 2008 projected growth: 1.3 percent.\n  - 2009 projected contraction: 2½ percent.\n  - 2010: slow recovery projected.\n- Drivers of slowdown:\n  - Deceleration in world demand and deteriorating confidence indicators.\n  - Financial market stress spilling over into sentiment and the real economy.\n  - Conservative consumer behavior expected to amplify export slowdown; investment decisions likely to be postponed.\n- Financial sector vulnerabilities:\n  - Failures in summer 2007 (IKB and Sachsen LB) required government intervention.\n  - Post-Lehman Brothers (Fall 2008) pressures (e.g., Hypo Real Estate liquidity rollover needs).\n  - Public commitment to protect household deposits initially stabilized confidence.\n  - Mid-October 2008 comprehensive package to support market liquidity and bank capitalization as part of globally-coordinated efforts.\n- Fiscal position:\n  - Fiscal consolidation in recent years and 2007 income/employment growth supported a balanced budget in 2008.\n  - Deficit expected to widen in 2009 and 2010 due to weakening economy and labor market and due to the authorities' stimulus package.\n  - Authorities aim to introduce a deficit rule to constrain the structural fiscal balance to about zero.\n  - More ambitious fiscal federalism reform postponed until 2019.\n- Risk assessment:\n  - Risks remain tilted to the downside."
    },
    {
      "heading": "Executive Board assessment: overall judgment and recommended actions",
      "content": "- Overall view:\n  - Germany under heightened pressure from global economic and financial turmoil due to high openness and integration with world economy.\n  - Prospect of a sizeable, possibly extended, economic downturn given sharp drop in world trade and weak domestic demand.\n  - Corporate and financial sector stresses risk becoming more intertwined.\n  - Directors welcomed initiatives to strengthen the financial safety net and the economic stimulus; fundamentals of the German economy remain strong; sustained fiscal prudence praised.\n- Financial sector measures and recommendations:\n  - Positive appraisal of creation of the Financial Market Stabilization Fund (FMSF) as vital to shielding the financial sector.\n  - Guarantees issued to help banks meet short-term funding needs; efforts to buttress capital positions welcomed.\n  - Recommendation: further recapitalization may be desirable given low capital in several banks and expected asset quality deterioration.\n  - Recommendation: agency administering the FMSF should use its authority more broadly to enhance financial sector soundness.\n  - Specific call: proactive restructuring and downsizing of the Landesbanken, noted as a continuing drain on public finances and a threat to financial stability.\n- Deposit insurance:\n  - Call for strengthened deposit insurance due to risks from existing multiple protection schemes that rely on ex post burden-sharing.\n  - Recommendation: establish a base layer of mandatory deposit insurance—ex ante funded by contributions from all banks—to provide unified terms of protection and reduce incentives to shift deposits among schemes.\n  - Note: evolving European Union rules should provide guidance on coverage limits.\n- Regulation and supervision:\n  - Case for tighter bank regulatory and supervisory process strengthened by the crisis.\n  - Recommendation: place greater reliance on timely supervisory assessments independent of banks' annual external audit cycle.\n  - Recommendation: link prudential regulation and supervision to a system of macro-surveillance and stability analysis.\n  - Observation: greater consolidation of regulatory and supervisory resources could yield significant benefits.\n- Fiscal stimulus and medium-term policy:\n  - Directors welcomed conjunctural fiscal stimulus packages in the past four months as timely and supportive of domestic demand and confidence.\n  - Noted components: accelerated reduction in social security contributions and stepped-up spending on infrastructure—considered well-targeted for short-term stimulus and lasting benefits.\n  - Views on size of stimulus: some Directors would have favored a more proactive stimulus given the deterioration in prospects; others supported balancing stimulus with fiscal prudence.\n  - All Directors welcomed authorities' reiteration of commitment to medium-term fiscal sustainability in accordance with the Stability and Growth Pact.\n- Other structural concerns:\n  - Trends in healthcare costs and debt accumulation by the states noted as concerns.\n  - Recommended measures: further rationalization of pharmaceutical expenditures; strengthened efficiency-enhancing competition to contain healthcare costs.\n  - Fiscal federalism: potential benefits from more state tax autonomy and redesign of supplementary federal grants to improve states' incentives for fiscal discipline.\n  - Recommendation: apply the proposed fiscal rule limiting the structural budget balance to close to zero also to the states."
    },
    {
      "heading": "Germany: Selected economic indicators (exact figures)",
      "content": "- Real GDP (change in percent):\n  - 2004: 1.2\n  - 2005: 0.8\n  - 2006: 3.0\n  - 2007: 2.5\n  - 2008: 1.3\n- Net exports (contribution to GDP growth):\n  - 2004: 1.4\n  - 2005: 0.7\n  - 2006: 1.0\n  - 2007: -0.2\n- Total domestic demand (change in percent):\n  - 2004: -0.1\n  - 2005: 0.0\n  - 2006: 2.1\n  - 2007: 1.1\n  - 2008: 1.6\n- Private consumption (change in percent):\n  - 2004: 0.1\n  - 2005: 0.2\n  - 2006: -0.4\n  - 2007: —\n  - 2008: —\n- Gross fixed investment (change in percent):\n  - 2004: -0.3\n  - 2005: 7.7\n  - 2006: 4.3\n  - 2007: 4.1\n- Construction investment (change in percent):\n  - 2004: -3.9\n  - 2005: -3.0\n  - 2006: 5.0\n  - 2007: 1.8\n  - 2008: 2.7\n- Gross national saving (percent of GDP):\n  - 2004: 21.8\n  - 2005: 22.1\n  - 2006: 23.7\n  - 2007: 25.9\n  - 2008: 25.0\n- Gross domestic investment (percent of GDP):\n  - 2004: 17.1\n  - 2005: 16.9\n  - 2006: 17.6\n  - 2007: 18.3\n  - 2008: 19.0\n- Labor force (percent of population) 3/:\n  - 2004: 43.0\n  - 2005: 43.3\n  - 2006: 43.2\n  - 2007: 43.4\n  - 2008: 43.4\n- Employment 3/ (percent of population):\n  - 2004: 38.8\n  - 2005: 39.0\n  - 2006: 39.7\n  - 2007: 40.3\n- Standardized unemployment rate (in percent):\n  - 2004: 9.2\n  - 2005: 10.6\n  - 2006: 9.8\n  - 2007: 8.4\n  - 2008: 7.3\n- Unit labor costs (industry; hourly data):\n  - 2004: -3.1\n  - 2005: -4.2\n  - 2006: -4.0\n  - 2007: -1.2\n- GDP deflator:\n  - 2004: 0.5\n- Harmonized CPI index:\n  - 2004: 1.9\n  - 2005: 2.3\n  - 2006: 2.8\n- Public finance (in percent of GDP):\n  - General government balance 4/:\n    - 2004: -3.8\n    - 2005: -3.3\n    - 2006: -1.5\n  - Structural government balance:\n    - 2004: -2.6\n    - 2005: -2.3\n  - General government gross debt:\n    - 2004: 64.7\n    - 2005: 66.4\n    - 2006: 66.0\n    - 2007: 65.0\n    - 2008: 68.7\n- Money and credit (change in percent over 12 months):\n  - Private sector credit 5/:\n    - 2004: 2.2\n    - 2005: 3.5\n    - 2006: 3.2\n    - 2007: 6.6\n    - 2008: 6.6\n  - M3 5/:\n    - 2004: 5.2\n    - 2005: 4.9\n    - 2006: 11.1\n- Interest rates (in percent):\n  - Three-month money market rate 6/:\n    - 2004: 3.7\n    - 2005: 4.8\n    - 2006: 3.4\n  - Ten-year government bond yield 6/:\n    - 2004: 3.6\n    - 2005: 3.8\n- Balance of payments (in billions of euros):\n  - Exports 7/:\n    - 2004: 850.3\n    - 2005: 924.6\n    - 2006: 1,056.3\n    - 2007: 1,148.6\n    - 2008: 1,206.6\n  - Imports 7/:\n    - 2004: 739.9\n    - 2005: 805.1\n    - 2006: 925.5\n    - 2007: 975.6\n    - 2008: 1,047.6\n  - Trade balance (percent of GDP):\n    - 2004: 6.3\n    - 2005: 6.4\n    - 2006: 7.8\n    - 2007: 7.1\n    - 2008: 7.1\n  - Current account balance (in billions of euros):\n    - 2004: 102.9\n    - 2005: 116.6\n    - 2006: 141.5\n    - 2007: 184.2\n    - 2008: 149.4\n  - Current account (percent of GDP):\n    - 2004: 4.7\n    - 2005: 6.1\n    - 2006: 7.6\n    - 2007: 6.0\n    - 2008: 6.0\n- Exchange rate (period average):\n  - Euro per U.S. dollar 6/:\n    - 2004: 0.80\n    - 2005: 0.73\n    - 2006: 0.74\n  - Nominal effective rate (1990=100) 6/:\n    - 2004: 115.7\n    - 2005: 114.7\n    - 2006: 114.9\n    - 2007: 119.7\n    - 2008: 115.8\n  - Real effective rate (1990=100) 8/:\n    - 2004: 105.5\n    - 2005: 102.2\n    - 2006: 99.1\n    - 2007: 97.9\n    - 2008: 95.1\n\nPublic Information Notice (PIN) No. 09/05, January 22, 2009.\n\n---\n\n Content in this bundle\n\n- Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Germany and the IMF\n- Public Information Notices\n- https://www.imf.org/external/mmedia/view.asp?eventID=1365\n- transcript\n- Adobe Acrobat Reader\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn0905"
    }
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    "Published: January 22, 2009",
    "Real GDP:",
    "Drivers of slowdown:",
    "Financial sector vulnerabilities:",
    "Fiscal position:",
    "Risk assessment:",
    "Overall view:",
    "Financial sector measures and recommendations:",
    "Deposit insurance:",
    "Regulation and supervision:",
    "Fiscal stimulus and medium-term policy:",
    "Other structural concerns:",
    "Real GDP (change in percent):",
    "Net exports (contribution to GDP growth):",
    "Total domestic demand (change in percent):",
    "Private consumption (change in percent):",
    "Gross fixed investment (change in percent):",
    "Construction investment (change in percent):",
    "Gross national saving (percent of GDP):",
    "Gross domestic investment (percent of GDP):",
    "Labor force (percent of population) 3/:",
    "Employment 3/ (percent of population):",
    "Standardized unemployment rate (in percent):",
    "Unit labor costs (industry; hourly data):",
    "GDP deflator:",
    "Harmonized CPI index:",
    "Public finance (in percent of GDP):",
    "Money and credit (change in percent over 12 months):",
    "Interest rates (in percent):",
    "Balance of payments (in billions of euros):",
    "Exchange rate (period average):",
    "[Country Report (PDF)](/external/pubs/ft/scr/2009/cr0915.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[https://www.imf.org/external/mmedia/view.asp?eventID=1365](https://www.imf.org/external/mmedia/view.asp?eventID=1365)",
    "[transcript](https://www.imf.org/external/np/tr/2009/tr012209.htm)",
    "[Adobe Acrobat Reader](https://www.imf.org/adobe)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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