Abstract
KEY ISSUES Context: Growth is benefiting from lower energy prices and euro depreciation, and the labor market is strong. The external position remains substantially stronger than implied by medium-term fundamentals as the current account surplus reached another historical high. The fiscal position is healthy, corporate and household balance sheets are sound. Low interest rates are compounding chronically weak bank profitability and hurting life insurers’ solvency. The population is aging fast despite record immigration, which will increasingly harm growth prospects after 2020. Policy priorities: Further progress is urgently needed to raise potential growth while generating beneficial spillovers to the rest of the euro area and lowering the large current account surplus: Step up investment addressing weaknesses in public infrastructure to strengthen potential output and domestic demand. To facilitate this process, put in place new institutions that enable better planning and coordination of public investment at the local level. Enhance competition to foster a more productive services sector. Reduce disincentives for women to work full time as a way to mitigate the adverse effects of an aging population on labor supply. Expand the macroprudential toolkit to better address potential future excesses in the housing sector. Ensure that life insurance companies maintain sufficient capital buffers to withstand a prolonged period of low interest rates.
Fund Relations
(As of May 31, 2015; unless specified otherwise)
Mission: April 29– May 11, 2015 in Berlin, Bonn, and Frankfurt. The concluding statement of the mission is available at http://www.imf.org/external/np/ms/2015/051115.htm.
Staff team: Ms. Detragiache (Head), Ms. Pereira, Mr. Vandenbussche (both EUR), and Ms. Boz (RES).
Country interlocutors: Bundesbank President Weidmann, senior representatives at the Chancellery, the Ministry of Finance, the Ministry of Economic Affairs and Energy, the Ministry of Labor, the Bundesbank, BaFin, and the European Central Bank. Mr. Meyer, Alternate Executive Director, also participated in the discussions. Additional meetings took place with industry, think tanks, trade unions, and financial market participants.
Fund relations: The previous Article IV consultation discussions took place during May 2014 and the staff report was discussed by the Executive Board on July 14, 2014. The Executive Board’s assessment and staff report are available at http://www.imf.org/external/pubs/cat/longres.aspx?sk=41766.0.
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 | 12,597.29 | 86.49 |
| Reserve position in Fund | 1,968.23 | 13.51 |
| Lending to the Fund | 2,563.23 |
| SDR Million | Percent of Quota | |
| Quota | 14,565.50 | 100.00 |
| Fund holdings of currency | 12,597.29 | 86.49 |
| Reserve position in Fund | 1,968.23 | 13.51 |
| Lending to the Fund | 2,563.23 |
SDR Department:
| SDR Million | Percent of Allocation | ||
| Net cumulative allocation | 12,059.17 | 100.00 | |
| Holdings | 11,930.87 | 98.94 | |
| SDR Million | Percent of Allocation | ||
| Net cumulative allocation | 12,059.17 | 100.00 | |
| Holdings | 11,930.87 | 98.94 | |
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, 2015):
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2015 | 2016 | 2017 | 2018 | 2019 | |
| Principal | |||||
| Charges/Interest | 0.03 | 0.27 | 0.27 | 0.27 | 0.27 |
| Total | 0.03 | 0.27 | 0.27 | 0.27 | 0.27 |
| Forthcoming | |||||
|---|---|---|---|---|---|
| 2015 | 2016 | 2017 | 2018 | 2019 | |
| Principal | |||||
| Charges/Interest | 0.03 | 0.27 | 0.27 | 0.27 | 0.27 |
| Total | 0.03 | 0.27 | 0.27 | 0.27 | 0.27 |
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)
Germany was last assessed against the AML/CFT standard in 2009. While generally comprehensive, Germany’s AML/CFT framework suffered from some shortcomings inter alia with respect to the money laundering and terrorist financing offenses, and AML/CFT preventive measures (including the reporting of suspicious transaction requirements, and customer due diligence, CDD, requirements). The authorities have taken a number of steps to remedy most of the main technical deficiencies identified, and in June 2014, the FATF recognized that Germany had made sufficient progress to exit the regular follow-up process. Notable progress includes the broadening of the scope of the money laundering offense amending the reporting requirement (e.g., threshold for reporting and terminology), and strengthening of some CDD requirements (including with respect to the identification of beneficial owners), as well as of sanctions for noncompliance with AML/CFT preventive measures. Further guidance for the banking sector on the implementation of AML/CFT requirements was issued and, in 2012, BaFin ordered sixteen financial institutions to undergo a special audit focused on the application of AML/CFT measures to their foreign branches and subsidiaries. The audits revealed occasional problems in the identification of the beneficial owners, and some difficulties in group-wide sharing of relevant information due to some countries’ strict data protection rules. Despite the important progress made, some technical deficiencies remain (e.g., with respect to the criminalization of self-laundering and of terrorist financing, and the tracing and freezing of terrorist funds). The next assessment of Germany’s AML/CFT framework is tentatively scheduled to take place in 2020.
Statistical Issues
| I. Assessment of Data Adequacy for Surveillance | |
| General: Data provision is adequate for surveillance. | |
| National Accounts Germany adopted the European System of Accounts 2010 (ESA2010) in September 2014. 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. Extrapolations of changes in inventories are based on the difference between the monthly production index and turnover index in manufacturing. 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 statistics. However, these data are based on cash accounting systems, although documentation exists to explain the differences between the general government data in the ESA2010 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 (ESA2010) 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. Balance of Payments Accounts The Bundesbank compiles the balance of payments in close cooperation with the Federal Statistical Office. Balance of payments, International Investment Position statistics, and related cross-border statistics are compiled according to the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), and the legal requirements of the ECB and Eurostat. Financial Soundness Indicators (FSIs) 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) and residential real estate prices (I37). Even though Germany reports all of the 12 core FSIs, six FSIs are reported on an annual basis only: (i) 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. Plans are already underway to change the legal basis for the periodicity of deposit taking institutions’ reporting requirements. In addition, the quality of data on bank exposures submitted to the BIS needs to be improved, including provision of the data on ultimate risk basis for advanced countries. | |
| II. Data Standards and Quality | |
| Subscriber to the Fund’s Special Data Dissemination Standards (SDDS) since December 2, 1996, and to SDDS Plus since February 2015. | Data ROSC is available. |
| I. Assessment of Data Adequacy for Surveillance | |
| General: Data provision is adequate for surveillance. | |
| National Accounts Germany adopted the European System of Accounts 2010 (ESA2010) in September 2014. 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. Extrapolations of changes in inventories are based on the difference between the monthly production index and turnover index in manufacturing. 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 statistics. However, these data are based on cash accounting systems, although documentation exists to explain the differences between the general government data in the ESA2010 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 (ESA2010) 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. Balance of Payments Accounts The Bundesbank compiles the balance of payments in close cooperation with the Federal Statistical Office. Balance of payments, International Investment Position statistics, and related cross-border statistics are compiled according to the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), and the legal requirements of the ECB and Eurostat. Financial Soundness Indicators (FSIs) 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) and residential real estate prices (I37). Even though Germany reports all of the 12 core FSIs, six FSIs are reported on an annual basis only: (i) 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. Plans are already underway to change the legal basis for the periodicity of deposit taking institutions’ reporting requirements. In addition, the quality of data on bank exposures submitted to the BIS needs to be improved, including provision of the data on ultimate risk basis for advanced countries. | |
| II. Data Standards and Quality | |
| Subscriber to the Fund’s Special Data Dissemination Standards (SDDS) since December 2, 1996, and to SDDS Plus since February 2015. | Data ROSC is available. |
Germany: Table of Common Indicators Required for Surveillance
(As of June 1, 2015)
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.
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 1, 2015)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness 9 | Data Quality–Accuracy and reliability 10 | ||||||
| Exchange Rates | Current | Current | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | April 15 | May 15 | M | M | M | ||
| Reserve/Base Money2 | April 15 | May 15 | M | M | M | ||
| Broad Money2 | April 15 | May 15 | M | M | M | ||
| Central Bank Balance Sheet | April 15 | May 15 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | April 15 | May 15 | M | M | M | ||
| Interest Rates3 | June 15 | June 15 | M | M | M | ||
| Consumer Price Index | April 15 | May 15 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing4 – General Government5 | Q4 14 | April 15 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Stocks of General Government and Government-Guaranteed Debt6 | December 14 | April 15 | A | A | A | ||
| External Current Account Balance | March 15 | May 15 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | March 14 | May 14 | M | M | M | ||
| GDP/GNP | Q1 15 | May 15 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | Q4 14 | March 15 | Q | Q | Q | ||
| International Investment Position7 | Q4 14 | May 15 | 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.
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 1, 2015)
| Date of latest observation | Date received | Frequency of Data7 | Frequency of Reporting7 | Frequency of Publication7 | Memo Items | ||
|---|---|---|---|---|---|---|---|
| Data Quality–Methodological soundness 9 | Data Quality–Accuracy and reliability 10 | ||||||
| Exchange Rates | Current | Current | D | D | D | ||
| International Reserve Assets and Reserve Liabilities of the Monetary Authorities1 | April 15 | May 15 | M | M | M | ||
| Reserve/Base Money2 | April 15 | May 15 | M | M | M | ||
| Broad Money2 | April 15 | May 15 | M | M | M | ||
| Central Bank Balance Sheet | April 15 | May 15 | M | M | M | ||
| Consolidated Balance Sheet of the Banking System | April 15 | May 15 | M | M | M | ||
| Interest Rates3 | June 15 | June 15 | M | M | M | ||
| Consumer Price Index | April 15 | May 15 | M | M | M | ||
| Revenue, Expenditure, Balance and Composition of Financing4 – General Government5 | Q4 14 | April 15 | Q | Q | Q | LO, LO, LO, O | O, O, O, O, O |
| Stocks of General Government and Government-Guaranteed Debt6 | December 14 | April 15 | A | A | A | ||
| External Current Account Balance | March 15 | May 15 | M | M | M | O, O, LO, O | O, O, O, O, O |
| Exports and Imports of Goods and Services | March 14 | May 14 | M | M | M | ||
| GDP/GNP | Q1 15 | May 15 | Q | Q | Q | O, O, O, O | LO, O, O, O, O |
| Gross External Debt | Q4 14 | March 15 | Q | Q | Q | ||
| International Investment Position7 | Q4 14 | May 15 | 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.
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.