The deficit ratio is likely to show little change this year. From a current perspective, there is also a significant risk that the 3% ceiling will be exceeded again in 2005 if no additional measures are taken. This description of the situation illustrates that there is a great need for the consolidation of public finances in Germany.
A consolidation is in Germany’s direct national interest and should be an integral part of the reform process. A high level of government borrowing may not only crowd out private investment, it must also be financed by higher taxes or lower expenditure in the future. In the long term the growing interest expenditure will impair general government’s ability to function.