Abstract
Germany’s economic growth and recovery from the global crisis are explained in this study. Tax, education, and innovation policies are specific measures supported by the authorities. External and financial shocks received by Germany and other outward spillovers are outlined. Germany has a high current account and international assets. From a long-term perspective, rebalancing of public finances to promote growth is desirable. Stress tests are conducted to confirm the capital buffers. Finally, the banking system of Germany reflects significant policy measures and economic recovery.
Annex I. Germany: Fund Relations
(As of April 30, 2011)
Mission: May 4 to May 17, 2011 in Frankfurt, Bonn, Mannheim, Munich and Berlin. The concluding statement of the mission is available at http://www.imf.org/external/np/ms/2011/051711.htm. A one day conference, attended by officials from various ministries, the Bundesbank, representatives from research institutes and academia, was organized jointly with the Ministry of Finance at the conclusion of the mission and helped amplify key issues of the consultation in the public debate.
Staff team: Messrs. Kähkönen (Head), Mody, Ms. Ivanova, and Messrs. Bornhorst, and Sandri (all EUR), Brockmeijer, and Schmieder (MCM), Vitek (SPR), and Ms. Luedersen (LEG).
Country interlocutors: The Bundesbank President Weidman, Director General at the Ministry of Finance Kerber, members of the German Council of Economic Experts, and senior representatives at the Chancellery, several ministries, the Bundesbank, and BaFin. Mr. Temmeyer, Executive Director for Germany, also participated in the discussions. Additional meetings took place with research institutes, law firms, and financial market participants.
Fund relations: The previous Article IV consultation discussions took in February 2010 and the staff report was discussed by the Executive Board on March 30, 2010. The Executive Board’s assessment and staff report are available at http://www.imf.org/external/pubs/cat/longres.aspx?sk=23762.0
I. Membership Status: Joined August 14, 1952; Article VIII.
II. General Resources Account:
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 14,565.50 | 100.00 |
| Fund holdings of currency | 10,648.48 | 73.11 |
| Reserve position in Fund | 3,917.09 | 26.89 |
| Lending to the Fund | 1,532.42 |
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 14,565.50 | 100.00 |
| Fund holdings of currency | 10,648.48 | 73.11 |
| Reserve position in Fund | 3,917.09 | 26.89 |
| Lending to the Fund | 1,532.42 |
III. SDR Department:
| SDR Million | Percent of Allocation | |
|---|---|---|
| Net cumulative allocation | 12,059.17 | 100.00 |
| Holdings | 11,801.38 | 97.86 |
| SDR Million | Percent of Allocation | |
|---|---|---|
| Net cumulative allocation | 12,059.17 | 100.00 |
| Holdings | 11,801.38 | 97.86 |
IV. Outstanding Purchases and Loans: None
V. Financial Arrangements: None
VI. Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2011 | 2012 | 2013 | 2014 | 2015 | |
| Principal | |||||
| Charges/Interest | 0.79 | 1.55 | 1.55 | 1.55 | 1.55 |
| Total | 0.79 | 1.55 | 1.55 | 1.55 | 1.55 |
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2011 | 2012 | 2013 | 2014 | 2015 | |
| Principal | |||||
| Charges/Interest | 0.79 | 1.55 | 1.55 | 1.55 | 1.55 |
| Total | 0.79 | 1.55 | 1.55 | 1.55 | 1.55 |
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, 2003-11
Growth, Current Account 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 German, 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.
The Crisis Impact on Potential Growth in Germany: The Nature of the Shock Matters, forthcoming.
German Productivity Growth: an Industry Perspective, forthcoming.
International and European Growth Spillovers: the Role of Germany, forthcoming.
Current Account Imbalances: How much can structural policies help reduce Germany’s surplus, forthcoming.
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 U.K., and the U.S.? 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.
Do Fiscal Spillovers Matter? 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.
What Does The Crisis Tell Us About The German Labor Market? Forthcoming.
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.
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 has been participating in the financial soundness indicators (FSIs) project since its inception. Annual data for most of the 40 FSIs are posted on the FSI website with effect from 2005 and quarterly data with effect from the fourth quarter of 2008. The last data available relate to the third quarter of 2010, suggesting that timeliness needs some improvement.
Germany: Table of Common Indicators Required for Surveillance
(As of May 24, 2011)
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 May 24, 2011)
| 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 | 05/24/2011 | 05/24/2011 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | April 11 | May 11 | M | M | M | ||
| Reserve/Base Money | April 11 | May 11 | M | M | M | ||
| Broad Money | April 11 | May 11 | M | M | M | ||
| Central Bank Balance Sheet | April 11 | May 11 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | March 11 | May 11 | M | M | M | ||
| Interest Rates2 | May 11 | May 11 | M | M | M | ||
| Consumer Price Index | April 11 | May 11 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Q4 10 | May 11 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3– Central Government (cash basis) | April 11 | May 11 | M | M | M | ||
| Stocks of General Government and Government-Guaranteed Debt5 | December 10 | May 11 | A | A | A | ||
| External Current Account Balance | March 11 | May 11 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | March 11 | May 11 | M | M | M | ||
| GDP/GNP | Q1 11 | May 11 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | December 10 | May 11 | Q | Q | Q | ||
| International Investment Position6 | December 10 | May 11 | 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 May 24, 2011)
| 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 | 05/24/2011 | 05/24/2011 | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | April 11 | May 11 | M | M | M | ||
| Reserve/Base Money | April 11 | May 11 | M | M | M | ||
| Broad Money | April 11 | May 11 | M | M | M | ||
| Central Bank Balance Sheet | April 11 | May 11 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | March 11 | May 11 | M | M | M | ||
| Interest Rates2 | May 11 | May 11 | M | M | M | ||
| Consumer Price Index | April 11 | May 11 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing3 – General Government4 | Q4 10 | May 11 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Revenue, Expenditure, Balance and Composition of Financing3– Central Government (cash basis) | April 11 | May 11 | M | M | M | ||
| Stocks of General Government and Government-Guaranteed Debt5 | December 10 | May 11 | A | A | A | ||
| External Current Account Balance | March 11 | May 11 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | March 11 | May 11 | M | M | M | ||
| GDP/GNP | Q1 11 | May 11 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | December 10 | May 11 | Q | Q | Q | ||
| International Investment Position6 | December 10 | May 11 | 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.