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German call for fiscal law

GERMANY is keen for other Eurozone countries to adopt a version of Berlin’s balanced budget law after economists voiced concern over Greece’s ability to repay its huge debt.

Germany’s fiscal constraints – known as Schuldenbremse – will prohibit the federal government from running a deficit of more than 0.35 per cent of the gross domestic product by 2016. No deficit will be allowed by 2020.

Wolfgang Scháuble, Germany’s finance minister, is putting together a package of reforms for the Eurozone, to be presented on Friday at the first meeting of a working group which will consider closer economic policy cooperation.

Germany has been vocal in its concerns about Greece’s ability to repay EU bailout funds.
Yesterday leading German economist Ulrich Kater echoed the concerns of Deutsche Bank’s chief executive Josef Ackermann on the subject.

Kater, the chief economist at Frankfurt’s DekaBank, told German news website Handelsblatt that stringent austerity measures and Greece’s lack of competitiveness would combine to dampen the country’s chances at reducing its debt.

“Greece will find it very, very difficult to pay back its debts in an orderly fashion,” Kater said, adding Athens should “place the greatest importance on achieving its [savings] goals…so as not to lose its ties to Europe”.

The economist’s stark warning came after Ackermann last week prompted a furious reaction from the markets by suggesting that he doubts Greece’s ability to implement the economic sacrifices needed to bring its finances under control.

EU finance ministers will meet in Brussels today to discuss the bailout.