Abstract
This 2010 Article IV Consultation highlights that the German economy is regaining the ground lost in the crisis. Policy support, restocking, and an uptick in global demand have lifted the economy from the recession. The authorities used the available fiscal space to implement countercyclical policy measures. Financial sector measures helped stabilize financial markets and mitigated systemic risk, but vulnerabilities remain. Executive Directors have welcomed the authorities’ fiscal strategy that combines short-term support for the economy with a firm commitment to fiscal consolidation in the medium term.
Annex I. Germany: Fund Relations
(As of December 31, 2009)
Mission: January 28 to February 8, 2010 in Frankfurt, Bonn, and Berlin. The concluding statement of the mission is available at http://www.imf.org/external/np/ms/2010/020810.htm.
Staff team: Messrs. Kähkönen (Head), Berger, Schindler, Clausen (all EUR), Seelig (MCM), Tressel (RES), and Ms. Luedersen (LEG).
Country interlocutors: The Bundesbank President Weber, State Secretaries Storm (Labor), and Pfaffenbach (Economy), members of the German Council of Economic Experts, and senior representatives at the Chancellery, several ministries, the Bundesbank, and BaFin. Mr. von Stenglin, the Alternate Executive Director for Germany, also participated in the discussions. Meetings took place with employers, research institutes, and financial market participants.
Fund relations: The previous Article IV consultation discussions took place from November 12, 2008. The staff report was discussed by the Executive Board on January, 14 2009. The Executive Board’s assessment and staff report are available at http://www.imf.org/external/pubs/cat/longres.cfm?sk=22627.0.
I. Membership Status: Joined August 14, 1952; Article VIII.
II. General Resources Account:
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 13,008.20 | 100.00 |
| Fund holdings of currency | 10,838.07 | 83.32 |
| Reserve position in Fund | 2,170.15 | 16.68 |
| Lending to the Fund | 338.10 |
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 13,008.20 | 100.00 |
| Fund holdings of currency | 10,838.07 | 83.32 |
| Reserve position in Fund | 2,170.15 | 16.68 |
| Lending to the Fund | 338.10 |
III. SDR Department:
| SDR Million | Percent of Allocation | |
|---|---|---|
| Net cumulative allocation | 12,059.17 | 100.00 |
| Holdings | 12,184.18 | 101.04 |
| SDR Million | Percent of Allocation | |
|---|---|---|
| Net cumulative allocation | 12,059.17 | 100.00 |
| Holdings | 12,184.18 | 101.04 |
IV. Outstanding Purchases and Loans: None
V. Financial Arrangements: None
VI. Projected Payments to Fund (SDR Million; based on existing use of resources present holdings of SDRs):
| Forthcoming | |||||
| 2010 | 2011 | 2012 | 2013 | 2014 | |
| Principal | |||||
| Charges/Interest | 0.90 | 0.90 | 0.90 | 0.90 | 0.90 |
| Total | 0.90 | 0.90 | 0.90 | 0.90 | 0.90 |
| Forthcoming | |||||
| 2010 | 2011 | 2012 | 2013 | 2014 | |
| Principal | |||||
| Charges/Interest | 0.90 | 0.90 | 0.90 | 0.90 | 0.90 |
| Total | 0.90 | 0.90 | 0.90 | 0.90 | 0.90 |
VII Exchange Rate Arrangement:
Germany’s currency is the euro, which floats freely and independently against other currencies.
Germany is an Article VIII member and maintains an exchange system free of restrictions on payments and transfers for current international transactions. It maintains measures adopted for security reasons, which have been notified to the Fund for approval in accordance with the procedures of Decision 144 and does so solely for the preservation of national or international security.
VIII Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT)
An assessment under the international standard for AML/CFT was conducted by the Fund’s Legal Department in May 2009. The detailed assessment report was adopted by the joint MENAFATF-FATF Plenary Meeting held in Abu Dhabi from February 17-19, 2010. The report concluded that, despite Germany introducing a number of measures in recent years to strengthen its AML/CFT regime, the AML/CFT framework is not fully in line with the standard. There are weaknesses in the legal framework and in sanctioning for non-compliance with AML/CFT requirements. The recommendations to address these include:
amending the Criminal Code to: criminalize (i) ML in a way that covers all serious predicate offenses, and (ii) TF in a way fully consistent with international standards;
amending the AML Act to: (i) improve preventive measures notably by imposing a reporting obligation based on suspicion rather than knowledge and that relates to the proceeds of criminal activity; and (ii) clearly establish that the FIU should carry out more of the core functions of an FIU as contemplated by the FATF standard;
fully and effectively implementing the UN Security Council Resolutions (UNSCRs) on TF;
applying sanctioning powers more effectively for breaches of AML/CFT obligations;
strengthening the effective implementation of AML/CFT obligations imposed on designated non-financial businesses and professions (DNFBPs); and
improving the collection of statistics and the provision of guidance and feedback to FIs.
Germany has made a clear commitment to further strengthen the national system for the prevention, detection and suppression of money laundering and terrorist financing.
IX. Staff Analytical Work on Germany, 2003-10
Growth and Competitiveness
Growth Linkages within Europe, IMF Country Report No. 08/81.
Economic Impact of Shortages of Skilled Labor in Germany, IMF Country Report No. 08/81.
What explains Germany’s Rebounding Export Market Share? CESifo Working Paper No. 1957.
Long-run Growth in Germany. IMF Country Report No. 06/17.
Does Excessive Regulation Impede Growth in Germany? IMF Country Report No. 06/17.
The Performance of Germany’s Non-Financial Corporate Sector - An International Perspective. IMF Country Report No. 06/17.
Investment Trends in OECD Countries: Long-Term Developments and Future Prospects. IMF Country Report No. 04/340.
Does PPP hold in the Long Run? Germany and Switzerland. IMF Country Report No. 04/340.
Business Investment in the Current Cycle. IMF Country Report No. 03/342.
After the Crisis: Lower Consumption Growth but Narrower Global Imbalances? IMF Working Paper No. 10/11.
Inflation
Inflation Smoothing and the Modest Effect of VAT in Germany, IMF Working Paper No. 08/175.
Simulating Inflation Forecasting in Real-Time: How Useful Is a Simple Phillips Curve in Germany, the UK, and the US? IMF Working Paper No. 10/52.
Fiscal Policy and Entitlement Programs
Tax Reform and Debt Sustainability in Germany: An Assessment Using the Global Fiscal Model. IMF Country Report No. 06/436.
Business Tax Reform. IMF Country Report No. 06/436.
Why is Germany’s Deficit so Large? IMF Country Report No. 06/17.
A Preliminary Public Sector Balance Sheet for Germany, IMF Country Report No. 06/17.
Germany: A Long-Run Fiscal Scenario Based on Current Policies, IMF Country Report No. 06/17.
Pensions and Growth. IMF Country Report No. 04/340.
Federalism and the Political Economy of Adjustment. IMF Country Report No. 04/340.
Fiscal Policy in the Euro Area: Does Germany Play a Leadership Role? IMF Working Paper, forthcoming.
Labor Markets
The Employment Effects of Labor and Product Markets Deregulation and their Implications for Structural Reform. CESifo Working Paper No 1709, May 2006.
Employment, Unemployment, and Labor Supply in Germany. IMF Country Report No. 04/340.
The Unbearable Stability of the German Wage Structure: Evidence and Interpretation. IMF Staff Papers, August 2004.
The Financial System
Landesbanken: A Measure of the Costs for Taxpayers. IMF Country Report No. 06/436.
The German Banking Sector: Credit Decline, Soundness and Efficiency. IMF Country Report No. 06/17.
Germany’s Three-Pillar Banking System. IMF Occasional Paper 233 (2004).
Germany’s Financial System: International Linkages and the Transmission of Financial Shocks. IMF Country Report No. 03/342.
Credit Conditions in Germany Following the Global Sub-Prime Crises, IMF Working Paper, forthcoming.
Corporate Governance
Germany’s Corporate Governance Reforms: Has the System Become Flexible Enough?, IMF Working Paper No. 08/179.
Annex II. Germany: Statistical Issues
Data provision is adequate for surveillance. Germany has a full range of statistical publications and subscribes to the Fund’s Special Data Dissemination Standard (SDDS). A ROSC Data Module report was published in January 2006. The authorities make substantial use of the Internet to facilitate on-line access to data and press information.
Germany adopted the European System of Integrated Economic Accounts 1995 (ESA95) in 1999. The 2005 ROSC Data Module mission found that the macroeconomic statistics generally follow internationally accepted standards and guidelines on concepts and definitions, scope, classification and sectorization, and basis for recording. However, the sources for estimating value added for a few categories of service industries could be improved. A direct source for quarterly changes in inventories, which is an important indicator of changes in GDP over the business cycle, is lacking. There is no systematic, proactive process to monitor the ongoing representativeness of the samples of local units and products between rebases of the producer price index.
Comprehensive data reporting systems support the accuracy and reliability of the government finance and balance of payments statistics. However, although explanatory documentation exists, differences between the general government data in the ESA95 classification and the general government cash data on an administrative basis is impairing fiscal analysis; Germany publishes—through Eurostat—general government revenue, expenditure, and balance on an accrual basis on a quarterly basis (ESA95) and submits annual data for publication in the Government Financial Statistics Yearbook, in GFSM 2001 format. Monthly data are only disseminated on a cash-basis.
Germany is participating in the Coordinated Compilation Exercise for financial soundness indicators (FSIs). In 2006, as part of this exercise, the German authorities compiled a comprehensive set of FSI data and metadata.
Germany: Table of Common Indicators Required for Surveillance
(As of February 23, 2010)
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA)
Reflects the assessment provided in the data ROSC (published on January 18, 2006, and based on the findings of the mission that took place during July 5–20, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning methodological soundness, namely, (i) concepts and definitions, (ii) scope, (iii) classification/sectorization, and (iv) basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).
Same as footnote 8, except referring to international standards concerning accuracy and reliability, namely, (i) source data, (ii) assessment of source data, (iii) statistical techniques, (iv) assessment and validation of intermediate data and statistical outputs, and (v) revision studies.
Germany: Table of Common Indicators Required for Surveillance
(As of February 23, 2010)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness8 | Data Quality–Accuracy and reliability9 | ||||||
| Exchange Rates | 02/23/2010 | 02/23/2010 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the MonetaryAuthorities1 | January 09 | February 10 | M | M | M | ||
| Reserve/Base Money | December 09 | January 10 | M | M | M | ||
| Broad Money | December 09 | January 10 | M | M | M | ||
| Central Bank Balance Sheet | December 09 | January 10 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | December 09 | January 10 | M | M | M | ||
| Interest Rates2 | January 10 | February 10 | M | M | M | ||
| Consumer Price Index | January 10 | February 10 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Q3 09 | January 10 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government (cash basis) | January 10 | February 10 | M | M | M | ||
| Stocks of General Government and Government-Guaranteed Debt5 | December 09 | January 10 | A | A | A | ||
| External Current Account Balance | December 09 | January 10 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and | December 09 | February 10 | M | M | M | ||
| Services | |||||||
| GDP/GNP | Q4 09 | January 10 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | September 09 | December 09 | Q | Q | Q | ||
| International Investment Position6 | September 09 | December 09 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA)
Reflects the assessment provided in the data ROSC (published on January 18, 2006, and based on the findings of the mission that took place during July 5–20, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning methodological soundness, namely, (i) concepts and definitions, (ii) scope, (iii) classification/sectorization, and (iv) basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).
Same as footnote 8, except referring to international standards concerning accuracy and reliability, namely, (i) source data, (ii) assessment of source data, (iii) statistical techniques, (iv) assessment and validation of intermediate data and statistical outputs, and (v) revision studies.
Germany: Table of Common Indicators Required for Surveillance
(As of February 23, 2010)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness8 | Data Quality–Accuracy and reliability9 | ||||||
| Exchange Rates | 02/23/2010 | 02/23/2010 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the MonetaryAuthorities1 | January 09 | February 10 | M | M | M | ||
| Reserve/Base Money | December 09 | January 10 | M | M | M | ||
| Broad Money | December 09 | January 10 | M | M | M | ||
| Central Bank Balance Sheet | December 09 | January 10 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | December 09 | January 10 | M | M | M | ||
| Interest Rates2 | January 10 | February 10 | M | M | M | ||
| Consumer Price Index | January 10 | February 10 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Q3 09 | January 10 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3 – Central Government (cash basis) | January 10 | February 10 | M | M | M | ||
| Stocks of General Government and Government-Guaranteed Debt5 | December 09 | January 10 | A | A | A | ||
| External Current Account Balance | December 09 | January 10 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and | December 09 | February 10 | M | M | M | ||
| Services | |||||||
| GDP/GNP | Q4 09 | January 10 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | September 09 | December 09 | Q | Q | Q | ||
| International Investment Position6 | September 09 | December 09 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.
Foreign, domestic bank, and domestic nonbank financing.
The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
Including currency and maturity composition
Includes external gross financial asset and liability positions vis-a-vis nonresidents.
Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA)
Reflects the assessment provided in the data ROSC (published on January 18, 2006, and based on the findings of the mission that took place during July 5–20, 2005) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning methodological soundness, namely, (i) concepts and definitions, (ii) scope, (iii) classification/sectorization, and (iv) basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).
Same as footnote 8, except referring to international standards concerning accuracy and reliability, namely, (i) source data, (ii) assessment of source data, (iii) statistical techniques, (iv) assessment and validation of intermediate data and statistical outputs, and (v) revision studies.