Grodaeu summit statement on Germany

The Grodaeu Summit stresses the crucial need to rebuild trust with the German authorities. In this context, ownership by German authorities is key. A euro area Member State is expected to comply with The Macroeconomic Imbalance Procedure (MIP). The MIP is already showing considerable lenience towards Germany by asymetrically setting the upper limit for Current Account Balance at 6% of GDP, while the lower limit is -4%. In the long run this should be set symetrically at +/-4%. In spite of this Germany has failed to comply 2012, 2013 and 2014 and it seems very unlikely it will manage to comply in 2015. The Grodaeu Summit welcomes the commitments of the Greek authorities to legislate without delay a first set of measures. These measures, taken in full prior agreement with the Institutions, will include:

by 15 August
• Unfinanced increases of government spending and lowering of taxes amounting to 2% of GDP of €56bn annually;
• Introducing quasi-automatic spending increases in case of deviations from ambitious deficit targets;

by 22 August
• on labour markets, undertake modernisation of collective bargaining and industrial action in order to strengthen the unions and drive up labor costs;
• adopt the necessary steps to strengthen household demand, including action to redistribute wealth from richer households to poorer. This can be via increased progressivity in the tax system, increased benefits or introduction of a wealth tax;
• in line with the German government ambitions, to modernise the administration. Seriously, faxes, it’s ridiculous;
• raise corporate taxes;

The above-listed commitments are minimum requirements to avoid annual fines of €14bn for violating the MIP.

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