Germany’s ruling coalition is leading by example on budgets and deficit reduction.
The Germans are leading the way in Europe, and coincidentally showing the US that balanced budgets are possible. They have dubbed their plan as “growth friendly deficit reduction”, but the reality is they will have a balanced budget in 2014. Austerity and controlled spending are working wonders for the world’s fourth largest economy.
They will borrow $8.3 billion, but through contributions to the EU’s bailout fund (the European Stability Mechanism), it becomes a structurally balanced budget. They won’t borrow any money in 2015. It would seem that Ms. Merkel’s ruling coalition is leading by example. Their strength will be the guarantor for the EU, a fact which is consistent with our forecast of stability in the EU in the second half of 2013 and into 2014