Abstract
KEY ISSUESContext:? Germany fundamentals are sound: balance sheets are generally healthy,unemployment is at a historic low, and the fiscal position is strong.? While a recovery is underway, medium-term growth prospects are subdued and thecurrent account surplus remains high. The economy also faces a still weakinternational environment, lingering uncertainty (including about future energycosts), and fast approaching adverse demographic changes.? Germany could do more to increase its growth, thus strengthening its role as anengine of euro area recovery.Policy recommendations:? Germany has the fiscal space to finance an increase in needed public investment,particularly in the transport infrastructure. Unlike public consumption, this woulddurably raise German output and have measurable growth spillovers on the rest ofthe euro area.? Further reforms in services sector regulation would boost competition andproductivity.? Greater clarity about the future energy sector regulatory framework wouldencourage private investment in the energy infrastructure and beyond andstrengthen the outlook.? Decisions on the future level of the minimum wage should take into account theemployment effects in certain regions.? Banks should keep strengthening their capital position ahead of the completion ofthe ECB’s Comprehensive Assessment.? The macroprudential framework needs to be ready as monetary conditions are set toremain accommodative for a prolonged period.
Fund Relations
(As of May 31, 2014; unless specified otherwise)
Mission: May 8–19, 2014 in Berlin, Bonn, and Frankfurt. The concluding statement of the mission is available at http://www.imf.org/external/np/ms/2014/051914.htm
Staffteam: Ms. Detragiache (Head), Mr. Elekdag, Ms. Raei, and Mr. Vandenbussche (all EUR).
Countryinterlocutors: Bundesbank President Weidmann, Minister of Finance Schäuble, senior representatives at the Chancellery, several ministries, the Bundesbank, and BaFin. Mr. Temmeyer, Executive Director, also participated in the discussions. Additional meetings took place with industry, research institutes, trade unions, and financial market participants.
Fundrelations: The previous Article IV consultation discussions took place during May-June 2013 and the staff report was discussed by the Executive Board on August 1, 2013. The Executive Board’s assessment and staff report are available at http://www.imf.org/external/np/sec/pr/2013/pr13299.htm
Membership Status: Joined August 14, 1952; Article VIII.
General Resources Account:
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 14,565.50 | 100.00 |
| Fund holdings of currency | 10,926.41 | 75.02 |
| Reserve position in Fund | 3,639.19 | 24.99 |
| Lending to the Fund | 3,349.58 |
| SDR Million | Percent of Quota | |
|---|---|---|
| Quota | 14,565.50 | 100.00 |
| Fund holdings of currency | 10,926.41 | 75.02 |
| Reserve position in Fund | 3,639.19 | 24.99 |
| Lending to the Fund | 3,349.58 |
SDR Department:
| SDR Million | Percent of Allocation | |
|---|---|---|
| Net cumulative allocation | 12,059.17 | 100.00 |
| Holdings | 11,671.04 | 96.78 |
| SDR Million | Percent of Allocation | |
|---|---|---|
| Net cumulative allocation | 12,059.17 | 100.00 |
| Holdings | 11,671.04 | 96.78 |
Outstanding Purchases and Loans: None
Financial Arrangements: None
Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs, as of May 31, 2014):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| Principal Charges/Interest | 0.20 | 0.47 | 0.47 | 0.47 | 0.47 |
| Total | 0.20 | 0.47 | 0.47 | 0.47 | 0.47 |
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| Principal Charges/Interest | 0.20 | 0.47 | 0.47 | 0.47 | 0.47 |
| Total | 0.20 | 0.47 | 0.47 | 0.47 | 0.47 |
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.
Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT)
The Fund assessed Germany against the AML/CFT in 2009. The detailed assessment report was adopted by the FATF in 2010. The assessors found that, while generally comprehensive, Germany’s AML/CFT framework was not fully in line with the standard. Shortcomings were identified with respect to, inter alia, the money laundering and terrorist financing offenses, and AML/CFT preventive measures (including the reporting of suspicious transaction requirements, and customer due diligence requirements). In 2012 and 2013, the authorities indicated in their follow-up reports to the FATF having taken a number of legislative and structural measures to address several of the deficiencies identified. They mentioned in particular having broadened the scope of the money laundering offense (by including additional predicate offenses), strengthened the reporting of suspicious transaction requirements, enhanced the identification of beneficial owner requirements, and strengthened sanctions for noncompliance with AML/CFT preventive measures. The authorities also informed the 2014 Article IV mission of ongoing initiatives to immobilize bearer shares and limit their use, increase the transparency of the beneficial ownership of legal persons, and strengthen the AML/CFT framework applicable to some designated nonfinancial businesses and professions. Remaining deficiencies to be addressed include the criminalization of self-laundering and shortcomings in the terrorist financing offense and freezing of terrorist assets. The authorities are encouraged to pursue their efforts to fully implement the revised AML/CFT standard.
Statistical Issues
| I. Assessment of Data Adequacy for Surveillance | |
|---|---|
| General: Data provision is adequate for surveillance. | |
| National accounts Germany plans to adopt the European System of Accounts 2010 (ESA 2010) in September 2014. Transition from the ESA 1995 (ESA95) will require a major revision of national accounts data. New data sources will also be incorporated in the new estimates. The Federal Statistical Office plans to recalculate all national accounts aggregates in full detail back to 1991. 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. Government Accounts Comprehensive data reporting systems support the accuracy and reliability of the government finance. Documentation exists to explain the differences between the general government data in the ESA95 classification and the general cash data on an administrative basis; Germany publishes—through Eurostat—general government revenue, expenditure, and balances 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. External Sector Statistics The Bundesbank compiles balance of payments statistics in close cooperation with the Federal Statistical Office. Starting with data for 2014, external sector statistics are compiled based on the Balance of Payments and International Investment Position Manual, sixth edition (BPM6) and in accordance with legal requirements of the ECB and Eurostat. Germany also participates in the IMF Coordinated Direct Investment Survey (CDIS), Coordinated Portfolio Investment Survey (CPIS), and the BIS Securities Statistics database. In addition, the Bundesbank reports quarterly gross external debt position data to the World Bank’s Quarterly External Debt Statistics (QEDS) database, and compiles and disseminates monthly reserve template and monthly official reserve data. Financial Soundness Indicators 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. Of the 40 FSIs, Germany reports all except net foreign exchange exposure to equity (I31), which is encouraged FSI for the nonfinancial sector (this indicator will not be included in the revised list of FSIs). Even though Germany reports all of the 12 core FSIs, six FSIs are being reported on an annual basis: (i) nonperforming loans (NPL) net of provisions to capital, (ii) NPL to total gross loans, (iii) return on assets, (iv) return on equity, (v) interest margin to gross income, and (vi) non-interest expense to gross income. In principle, the banking supervision in Germany intends to shorten the periodicity of FSI data that are currently reported on an annual basis to quarterly reporting in 2015. Plans are currently underway to change the legal basis for reporting requirements. | |
| II. Data Standards and Quality | |
| Subscriber to the Fund’s Special Data Dissemination Standard since December 2, 1996. | Data ROSC is available. |
| I. Assessment of Data Adequacy for Surveillance | |
|---|---|
| General: Data provision is adequate for surveillance. | |
| National accounts Germany plans to adopt the European System of Accounts 2010 (ESA 2010) in September 2014. Transition from the ESA 1995 (ESA95) will require a major revision of national accounts data. New data sources will also be incorporated in the new estimates. The Federal Statistical Office plans to recalculate all national accounts aggregates in full detail back to 1991. 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. Government Accounts Comprehensive data reporting systems support the accuracy and reliability of the government finance. Documentation exists to explain the differences between the general government data in the ESA95 classification and the general cash data on an administrative basis; Germany publishes—through Eurostat—general government revenue, expenditure, and balances 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. External Sector Statistics The Bundesbank compiles balance of payments statistics in close cooperation with the Federal Statistical Office. Starting with data for 2014, external sector statistics are compiled based on the Balance of Payments and International Investment Position Manual, sixth edition (BPM6) and in accordance with legal requirements of the ECB and Eurostat. Germany also participates in the IMF Coordinated Direct Investment Survey (CDIS), Coordinated Portfolio Investment Survey (CPIS), and the BIS Securities Statistics database. In addition, the Bundesbank reports quarterly gross external debt position data to the World Bank’s Quarterly External Debt Statistics (QEDS) database, and compiles and disseminates monthly reserve template and monthly official reserve data. Financial Soundness Indicators 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. Of the 40 FSIs, Germany reports all except net foreign exchange exposure to equity (I31), which is encouraged FSI for the nonfinancial sector (this indicator will not be included in the revised list of FSIs). Even though Germany reports all of the 12 core FSIs, six FSIs are being reported on an annual basis: (i) nonperforming loans (NPL) net of provisions to capital, (ii) NPL to total gross loans, (iii) return on assets, (iv) return on equity, (v) interest margin to gross income, and (vi) non-interest expense to gross income. In principle, the banking supervision in Germany intends to shorten the periodicity of FSI data that are currently reported on an annual basis to quarterly reporting in 2015. Plans are currently underway to change the legal basis for reporting requirements. | |
| II. Data Standards and Quality | |
| Subscriber to the Fund’s Special Data Dissemination Standard since December 2, 1996. | Data ROSC is available. |
Germany: Table of Common Indicators Required for Surveillance
(As of June 26, 2014)
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Pertains to contribution to EMU aggregate.
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 9, 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 June 26, 2014)
| Date of latest observation | Date received | Frequency of Data8 | Frequency of Reporting8 | Frequency of Publication8 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness9 | Data Quality–Accuracy and reliability10 | ||||||
| Exchange Rates | Current | Current | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | May 14 | June 14 | M | M | M | ||
| Reserve/Base Money2 | April 14 | May 14 | M | M | M | ||
| Broad Money2 | April 14 | May 14 | M | M | M | ||
| Central Bank Balance Sheet | April 14 | May 14 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | April 14 | May 14 | M | M | M | ||
| Interest Rates3 | June 14 | June 14 | M | M | M | ||
| Consumer Price Index | May 14 | June 14 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing4 – General Government5 | Q4 13 | May 14 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Stocks of General Government and Government-Guaranteed Debt6 | December 13 | May 14 | A | A | A | ||
| External Current Account Balance | April 14 | June 14 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | April 14 | June 14 | M | M | M | ||
| GDP/GNP | Q1 14 | May 14 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | Q4 13 | April 14 | Q | Q | Q | ||
| International Investment Position7 | Q4 13 | April 14 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Pertains to contribution to EMU aggregate.
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 9, 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 June 26, 2014)
| Date of latest observation | Date received | Frequency of Data8 | Frequency of Reporting8 | Frequency of Publication8 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness9 | Data Quality–Accuracy and reliability10 | ||||||
| Exchange Rates | Current | Current | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | May 14 | June 14 | M | M | M | ||
| Reserve/Base Money2 | April 14 | May 14 | M | M | M | ||
| Broad Money2 | April 14 | May 14 | M | M | M | ||
| Central Bank Balance Sheet | April 14 | May 14 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | April 14 | May 14 | M | M | M | ||
| Interest Rates3 | June 14 | June 14 | M | M | M | ||
| Consumer Price Index | May 14 | June 14 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing4 – General Government5 | Q4 13 | May 14 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Stocks of General Government and Government-Guaranteed Debt6 | December 13 | May 14 | A | A | A | ||
| External Current Account Balance | April 14 | June 14 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | April 14 | June 14 | M | M | M | ||
| GDP/GNP | Q1 14 | May 14 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | Q4 13 | April 14 | Q | Q | Q | ||
| International Investment Position7 | Q4 13 | April 14 | Q | Q | Q | ||
Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.
Pertains to contribution to EMU aggregate.
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 9, 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.