COMMISSION STAFF WORKING DOCUMENT Assessment of the 2013 national reform programme and stability programme for GERMANY Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Germany’s 2013 national reform programme and delivering a Council Opinion on Germany’s stability programme for 2012-2017
Date: 2013-05-29
Institutions: European Commission
Subjects: Germany, banking system, budgetary equilibrium, competitiveness, economic growth, educational reform, energy policy, innovation, job creation, labour market, rail transport

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 355 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2013 national reform programme and stability programme for 
GERMANY 

Accompanying the document 

Recommendation for a COUNCIL RECOMMENDATION  

on Germany’s 2013 national reform programme and delivering a Council Opinion on 
Germany’s stability programme for 2012-2017 

{COM(2013) 355 final} 

EN 

   EN 

 
 
 
 
  
 
CONTENTS 

Executive summary .................................................................................................................... 3 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Introduction .................................................................................................................. 5 

Economic developments and challenges...................................................................... 6 

Recent economic developments and outlook............................................................... 6 

Challenges .................................................................................................................... 8 

Assessment of policy agenda ....................................................................................... 9 

Fiscal policy and taxation............................................................................................. 9 

Financial sector .......................................................................................................... 15 

Labour market, education and social policies ............................................................ 16 

Structural measures promoting growth and competitiveness..................................... 19 

Modernisation of public administration ..................................................................... 22 

Overview table ........................................................................................................... 24 

Annex ......................................................................................................................... 26 

2 

 
 
 
 
1. 

EXECUTIVE SUMMARY 

Economic Outlook 

The German economy is expected to continue growing in the coming years. According to 
the  Commission’s  2013  spring  forecast,  annual  real  GDP  growth  is  projected  to  decelerate 
further  from  0.7 %  in  2012  to  0.4 %  in  2013,  before  picking  up  to  1.8 %  in  2014.  Domestic 
demand is expected to be the main driver of economic growth. The unemployment rate should 
continue to decline, though only slightly, from 5.5 % in 2012 to 5.4 % in 2013 and 5.3 % in 
2014. Growth in compensation per employee is expected to rise from 2.4 % in 2013 to 3.1 % 
in 2014, while annual headline inflation is forecast to decline from 2.1 % in 2012 to 1.8 % in 
2013  and  1.6 %  in  2014.  The  current  account  surplus  is  expected  to  decline  but  to  remain 
above 6 % of GDP over the forecast horizon.  

Germany recorded a headline budget surplus of 0.2 % of GDP in 2012. The Commission 
predicts this will turn into a deficit of 0.2 % of GDP in 2013, while the budget is expected to 
come into balance in 2014. In structural terms, Germany registered a surplus of 0.3 % of GDP 
in 2012, reaching its medium-term budgetary objective, and the Commission forecasts it will 
remain  in  surplus  of  around  ½ %  of  GDP  in  2013  and  2014.  Germany’s  debt-to-GDP  ratio 
increased to 81.9 % in 2012, mainly due to the euro area stabilisation measures, and is forecast 
to fall to 81.1 % in 2013 and 78.6 % in 2014. 

Key Issues 

Germany  has  made  limited  progress  in  taking  measures  to  address  the  2012  CSRs. 
Germany’s  public  finances  have  continued  to  improve  and  the  budget  produced  a  small 
surplus in 2012. Financial sector regulation and supervision has been strengthened, but there 
is  still  scope  to  increase  the  efficiency  of  the  banking  sector.  Germany  is  making  efforts  to 
accelerate  the  deployment  of  energy  networks,  but  initiatives  to  reduce  the  overall  costs  of 
transforming  the  energy  system  have  not  yet  led  to  tangible  results.  In  other  areas,  reform 
efforts  have  been  limited,  e.g.  as  regards  improving  incentives  to  work.  Efforts  to  stimulate 
competition in the services and railway sectors have been limited. 

Despite  the  current  overall  favourable  economic  situation,  Germany  faces  important 
challenges, especially in the medium and long term, but its policy plans for 2013 do not 
go  far  enough  in  some  areas  to  address  these.  In  particular,  Germany  needs  to  tackle 
shortcomings in the labour market and in the energy system, inefficiencies in some spending 
policies and in the tax system, and barriers to competition, particularly in the services, railway 
and  banking  sectors.  The  country  would  also  benefit  from  more  balanced  growth  based  on 
strengthened domestic demand. 

•  Public finances: Germany’s public finances have continued to improve thanks to its 
good  economic  and  labour  market  performance,  but  at  about  82 %  of  GDP  in  2012, 
government  debt  is  still  well  above  the  60 %  of  GDP  threshold  of  the  Stability  and 
Growth Pact. There is scope to improve the efficiency of the health and long-term care 
systems. The application of a reduced VAT rate to a wide range of goods and services 
and  the  outdated  valuation  of  the  real  estate  tax  base  create  inefficiencies  in  the  tax 
system. 

3 

 
•  Labour  market  and  education:  A  shrinking  workforce  is  expected  to  affect 
Germany’s  potential  growth.  Shortages  of  skilled  workers  are  already  emerging  in 
various sectors and regions. At the same time, there is scope for increasing the labour 
force participation and the number of hours worked among certain people, including 
women,  low-wage  earners,  people  with  a  migration  background  and  long-term 
unemployed.  Moreover,  the  skills  potential  in  particular  of  those  with  a  socio-
economically disadvantaged background is not fully used. 

•  Energy: The new energy strategy (‘energy turnaround’) opens the door to new growth 
opportunities and helps reduce  Germany’s dependence on external energy sources in 
the  long  term,  but  it  also  involves  challenges  in  terms  of  potentially  high  economic 
cost,  the  possibility  of  capacity  constraints,  and  the  need  for  enhanced  coordination 
with neighbouring countries. 

•  Competition, innovation and regulatory framework: Barriers to competition persist 
in the services, railway and banking sectors. Germany is one of the EU’s innovation 
leaders, but other economies are investing more in research and innovation. There is 
also room for improvement and simplification in business regulation. 

•  Current  account:  Germany  has  recorded  significant  current  account  surpluses  over 
the last decade. Reducing the surplus would — to the extent that it relates to market 
failures  and  structural  reform  needs  —  benefit  Germany  and  at  the  same  time 
contribute to the euro area rebalancing process by creating positive spillovers. 

4 

 
 
1. 

INTRODUCTION 

In  May  2012,  the  Commission  proposed  a  set  of  country-specific  recommendations  (CSRs) 
for  economic  and  structural  reform  policies.  On  the  basis  of  these  recommendations  the 
Council of the European Union adopted four CSRs in the form of a Council Recommendation 
in July 2012.1 These CSRs concerned public finances, the financial sector, the labour market 
and the education system, and services and network industries. This Staff Working Document 
(SWD) assesses the state of implementation of these recommendations. 

The  SWD  assesses  policy  measures  in  light  of  the  findings  of  the  Commission’s  Annual 
Growth Survey 2013 (AGS)2 and the second annual Alert Mechanism Report (AMR),3 which 
were  published  in  November  2012.  The  AGS  sets  out  the  Commission’s  proposals  for 
building the necessary common understanding about the priorities for action at national and 
EU  level  in  2013.  It  identifies  five  priorities  to  guide  Member  States  to  renewed  growth: 
pursuing differentiated, growth-friendly fiscal consolidation; restoring normal lending to the 
economy;  promoting  growth  and  competitiveness  for  today  and  tomorrow;  tackling 
unemployment  and  the  social  consequences  of  the  crisis;  and  modernising  public 
administration.  The  AMR  serves  as  an  initial  screening  device  to  determine  whether 
macroeconomic  imbalances  exist  or  risks  are  emerging  in  Member  States.  The  AMR  found 
positive signs that macroeconomic imbalances in Europe are being corrected. To ensure that a 
complete and durable rebalancing is achieved, 14 Member States were selected for a review 
of developments in the accumulation and unwinding of imbalances.4 

Against  the  background  of  the  2012  Council  Recommendations,  the  AGS  and  the  AMR, 
Germany presented updates of her national reform programme (NRP) on 12 April 2013 and of 
her stability programme on 17 April 2013. These programmes provide detailed information on 
the  country’s  progress  since  July  2012  and  on  the  future  plans  of  the  government.  The 
information contained in these programmes provides the basis for the assessment made in this 
SWD.  

The  programmes  submitted  went  through  a  consultation  process  involving  the  federal 
parliament, the federal council, regional authorities and stakeholders. 

Overall assessment 

The analysis in this SWD leads to the conclusion that Germany has made limited progress in 
taking  measures  to  address  the  CSRs  in  the  Council  Recommendation.  Germany’s  public 
finances  have  continued  to  improve  and  the  general  government  budget  produced  a  small 
surplus in 2012. The regulatory framework in the financial sector has been strengthened, but 
there still appears to be scope for increasing the efficiency of the banking sector. Germany is 
making  efforts  to  accelerate  the  deployment  of  energy  networks,  but  initiatives  to  minimise 
the  overall  economic  costs  of  transforming  the  energy  system  have  not  yet  led  to  tangible 
results.  No  substantial  measures  have  been  adopted  to  increase  work  incentives  for  second 
and low-wage earners. Progress in increasing the availability of full-time childcare facilities 

1  
2  
3  
4  

OJ C 219, 24.7.2012, p. 35-37. 
COM(2012) 750 final. 
COM(2012) 751 final. 
Germany  was  not  selected  for  an  in-depth  review.  13  in-depth  reviews  were  published  on  10  April 
2013. While selected for an in-depth review in the AMR, Cyprus was ultimately not reviewed under the 
Macroeconomic  Imbalance  Procedure  in  view  of  the  advanced  preparations  for  a  financial  assistance 
programme. 

5 

 
                                                 
appears insufficient to meet the estimated needs and remains limited regarding the availability 
of  all-day  schools,  while  the  new  childcare  allowance  (Betreuungsgeld)  may  create  an 
additional  disincentive  for  parents  to  work.  Some  progress  has  been  made  to  increase  the 
performance  of  the  education  system.  Efforts  to  stimulate  competition  in  the  services  and 
railway sectors have been limited. 

Overall,  the  policy  plans  submitted  by  Germany  are  relevant  and  in  line  with  the  AGS 
priorities, but in some areas they do not go far enough to address key challenges. The NRP 
and  the  stability  programme  are  broadly  coherent.  Both  documents  confirm  Germany’s 
commitment to continue sound fiscal policies. The NRP reiterates plans to review the system 
to promote renewable energy and announces measures to further improve the stability of the 
financial  sector.  Germany’s  plans  appear  unambitious  when  it  comes  to  improving  the 
efficiency of public expenditure and the tax system, activating labour and skills potential and 
increasing  competition  in  the  services  and  railway  sectors.  The  NRP  does  not  provide 
estimates of the quantitative impact on growth of specific reform measures. 

2. 

ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

Recent economic developments 

In 2012 and early 2013, economic growth in Germany was significantly affected by the 
slowdown in global economic activity and the prevailing uncertainty caused by the debt 
crisis. After a weakening of growth in the second and third quarters of 2012, GDP dropped 
abruptly  by  0.7 %  q-o-q  (seasonally  and  working-day  adjusted)  in  the  final  quarter.  This 
setback  was  temporary  and  some  stabilisation  took  place  in  the  first  quarter  of  this  year.  In 
annual terms, real GDP growth decelerated to 0.7 % in 2012 following a strong recovery and 
expansion in 2010 and 2011. 

After having been the main growth driver in the two previous years, domestic demand 
weakened  in  2012,  which  contributed  to  an  increased  current  account  surplus.  The 
increase in consumption was not sufficient to offset the marked decrease in gross investment. 
This  led  import  growth  to  slow  down  more  strongly  than  export  growth,  resulting  in  a 
considerable contribution of net exports to real GDP growth. This development was reflected 
in a strong increase in the current account surplus in 2012, although other factors including 
safe-haven effects with regard to primary income might have played a role as well. While the 
surplus  vis-à-vis  the  rest  of  the  world  increased  significantly,  the  surplus  vis-à-vis  the  euro 
area continued to decline, mainly due to import growth exceeding weak export growth with 
respect  to  the  euro  area.  Moreover,  in  particular  the  balance  of  primary  income  and  the 
services balance were subject to major upward revisions for the past few years. According to 
balance of payments statistics, the current account balance has been above 6 % of GDP since 
2010 and reached 7.0 % in 2012. 

The  labour  market  continued  to  perform  favourably  in  2012  and  employment  growth 
turned out to be remarkably robust considering the weakened economic activity. Despite 
a deceleration, employment rose strongly by 1.1 % and the unemployment rate declined to an 
average  of  5.5 %,  putting  it  at  the  lowest  level  since  1991.  This  was  accompanied  by  a 
significant increase in gross wages and salaries per employee of 2.7 %. These labour market 
developments,  together  with  firms’  strong  international  competitiveness  and  favourable 
financing  conditions,  underpin  the  German  economy’s  still  intact  fundamentals.  Headline 

6 

 
inflation declined but remained slightly above the 2 % threshold, in particular owing to energy 
and food price increases. 

Economic outlook 

According  to  the  Commission’s  2013  spring  forecast,  economic  growth  is  projected  to 
reaccelerate  along  with  the  expected  improvement  to  the  external  environment. 
Equipment investment is forecast to start recovering in the course of the year, so that import 
growth is likely  to  increase more strongly than export  growth from then on. Moreover, low 
interest  rates,  rising  wages  and  robust  labour  market  developments  should  continue  to 
underpin  private  housing  investment  and  consumption.  Overall,  real  GDP  is  projected  to 
increase by 0.4 % in 2013 and by 1.8 % in 2014. 

The  expansion  of  employment  is  expected  to  slow  down  given  that  hours  worked  per 
employee are likely to be gradually restored. Employment is forecast to expand by 0.5 % 
this  year  and  next.  Labour  supply  is  expected  to  be  boosted  further  by  considerable  net 
migration, besides the sustained upward trend in labour market participation. As a result, the 
unemployment rate should continue to decline — though only slightly — reaching 5.4 % this 
year and 5.3 % next year. With stronger wage growth and no further changes in the pension 
contribution rate, growth in compensation per employee is expected to accelerate from 2.4 % 
in 2013 to 3.1 % in 2014. The gradually increasing scope for passing on higher labour costs to 
consumer prices is expected to be more than offset by lower pressure from energy and food 
prices  in  particular.  Overall,  annual  headline  inflation  is  forecast  to  continue  to  decline  to 
1.8 % in 2013 and 1.6 % in 2014. 

The current-account surplus is expected to decline but to remain above 6 % of GDP over 
the  forecast  horizon.  Based  on  the  projected  growth  pattern  with  investments  boosting 
imports and further real wage increases fostering consumption, domestic demand is expected 
to  strengthen  and  net  exports  to  contribute  less  to  GDP  growth  over  the  forecast  horizon. 
Returning  confidence  in  foreign  financial  assets,  along  with  dissipating  uncertainty,  should 
also contribute to reducing the current account surplus. 

Commission  estimates  indicate  that  potential  output  will  grow  at  around  1¼ %  p.a.  in 
2013/2014, followed by a gradual decline to around 1 % in 2015-2017. The negative output 
gap, arising from potential growth exceeding GDP growth in 2013, is expected to be partly 
closed in 2014. 

The NRP and the stability programme share the same macroeconomic outlook, which is 
broadly in line with the Commission’s 2013 spring forecast as regards the pace and pattern 
of  economic  growth  in  2013  and  2014,  as  well  as  with  the  Commission’s  estimate  of 
Germany’s medium-term potential growth rate. Labour-market developments as projected by 
the  government  appear  somewhat  pessimistic,  while  the  programme’s  estimate  of  potential 
growth is somewhat higher in 2015-2017 than the Commission’s estimates.5 The NRP and the 
stability programme do not provide estimates of the quantitative impact on economic growth 
of specific reform measures and do not specify whether their impact is explicitly considered 
in its macroeconomic outlook. 

5  

The  outlook  underlying  the  programmes  is  based  on  the  government’s  January  2013  Economic 
Projections.  Labour  market  and  potential  growth  projections  published  after  the  submission  of  the 
programmes are more closely in line with the Commission’s estimate. 

7 

 
                                                 
2.2. 

Challenges 

Despite  the  current  overall  favourable  economic  situation,  Germany  faces  important 
challenges, especially in the medium and long term. In particular, the expected significant 
decline  in  the  workforce  due  to  demographic  change  and  the  potential  risks  associated  with 
the deep transformation of the energy system could hinder Germany’s economic performance 
in  the  future.  This  means  that  obstacles  to  increasing  potential  growth  —  including 
shortcomings in the labour market and in the energy system, inefficiencies in some spending 
policies and in the tax system, as well as barriers to competition in some sectors — need to be 
addressed. The country would also benefit from more balanced growth based on strengthened 
domestic demand. These challenges were already identified in the 2012 SWD and reflected in 
the 2012 CSRs. 

Most  important  of  all,  though,  is  the  need  to  increase  the  labour  supply  and  enhance 
human  capital  in  view  of  the  demographic  changes  ahead.  A  shrinking  workforce  is 
expected  to  affect  Germany’s  potential  growth.6  Shortages  of  skilled  workers  are  already 
emerging  in  various  sectors  and  regions,  affecting  in  particular  small  and  medium-sized 
enterprises.  Demographic  change  may  also  weaken  entrepreneurial  activity  in  the  future  by 
preventing  the  creation  of  new  businesses.  At  the  same  time,  there  remains  scope  for 
increasing the labour force participation or the number of hours worked among certain people, 
including  women  —  who  represent  the  largest  potential  source  of  additional  labour  force 
participation according to the 2011 Plan to Secure Skilled Labour (Fachkräftesicherung) —  
low-wage  earners,  people  with  a  migration  background,  older  workers  and  long-term 
unemployed. Moreover, the skills potential of some people, in particular those with a socio-
economically disadvantaged background, is not fully used. Improving the performance of the 
education system and the integration of people into the labour market would also contribute to 
reducing the high gender pay gap and the risk of poverty and social exclusion for persons of 
all ages, including the elderly. 

The  deep  transformation  of  Germany’s  energy  system  remains  a  challenge.  The  new 
energy strategy (‘energy turnaround’) opens the door to new growth opportunities and helps 
reduce the country’s dependence on external energy sources in the long term. However, this 
strategy also involves challenges in terms of potentially high economic costs accentuated by 
inefficiencies in the energy policy instruments, the possibility of capacity constraints caused 
by  delays  in  the  deployment  of  infrastructure,  and  the  need  for  enhanced  coordination  with 
neighbouring countries to avoid negative spill-over effects. 

There are still inefficiencies in some spending policies and in the tax system. Germany’s 
public  finances  have  continued  to  improve  thanks  to  its  good  economic  and  labour  market 
performance.  However,  at  about  82 %  in  2012,  government  debt  as  a  percentage  of  GDP  is 
still  well  above  the  60 %  threshold  of  the  Stability  and  Growth  Pact.  There  is  scope  for 
improving  the  efficiency  of  the  health  and  long-term  care  systems.  The  application  of  the 
reduced VAT rate to a wide range of goods and services and the outdated valuation of the real 
estate tax base create inefficiencies in the tax system. 

Barriers to competition persist in the services sectors, including in regulated professions, 
as well as in the railway and banking sectors, and there is still room for improvement as 
regards R&D intensity, innovation and the regulatory framework. Productivity growth in 

6  

The Federal Statistical Office estimates that the German population of working age will decline by 18-
22 % by 2035 and by 27-34 % by 2060 compared with 2008, depending on the assumptions made about 
migration. There are important differences between Länder. 

8 

 
                                                 
the services sector is low and there is scope for increasing competition in the services sectors, 
e.g. by eliminating unnecessary restrictions in professional services and certain crafts, and for 
improving  the  institutional  framework  for  competition.  Competition  in  the  railway  markets 
remains  weak.  The  financial  sector  has  undergone  significant  adjustment  and  the  regulatory 
framework  has  been  strengthened.  However,  there  still  appear  to  be  obstacles  to  market-
driven consolidation in the banking sector which affect the overall efficiency of the financial 
sector.  Germany  is  one  of  the  EU’s  innovation  leaders,  but  other  economies  are  investing 
more  in  research  and  innovation,  and  bottlenecks  for  start-up  companies  are  hindering  the 
development of high-tech sectors. The business-friendliness of the regulatory environment is 
generally good, although there is room for improvement and simplification in certain areas, in 
particular those affecting small and medium-sized enterprises. 

Germany has recorded significant current account surpluses over the last decade. This 
needs to be seen against the background of sizeable domestic economic imbalances that built 
up  in  the  wake  of  reunification  and  the  following  adjustment  process.  In  particular,  wage 
moderation  and  labour  market  reforms  took  a  toll  on  private  consumption,  while  domestic 
investments suffered from a protracted reduction of excess capacity in the construction sector. 
However,  reducing  the  surplus  would  —  to  the  extent  that  it  relates  to  market  failures  and 
structural reform needs — benefit Germany and at the same time contribute to the euro area 
rebalancing  process  by  creating  positive  spillovers.  Activating  untapped  labour  and  skill 
potential as well as increasing competition particularly in non-tradable sectors in line with the 
2012  CSRs  could  help  raise  income,  reallocate  resources  and  promote  investment,  thus 
contributing to diversifying growth by strengthening domestic demand. 

3. 

ASSESSMENT OF POLICY AGENDA 

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

Germany’s  2013  stability  programme  aims  at  achieving  the  medium-term  budgetary 
objective (MTO) and steadily bringing down the debt-to-GDP ratio over the programme 
period.  The  stability  programme  confirms  the  MTO  of  a  structural  deficit  no  higher  than 
0.5 %  of  GDP,  which  is  in  line  with  the  requirements  of  the  Stability  and  Growth  Pact.  A 
slight structural surplus is expected in 2013, which is planned to stabilise at roughly ½ % of 
GDP in the coming years. 

Germany recorded a general government budget surplus of 0.2 % of GDP in 2012 and 
therefore  achieved  a  budgetary  position  significantly  above  its  deficit  target  of  1 %  of 
GDP  set  in  last  year’s  stability  programme.  Even  though  growth  turned  out  as  expected, 
the increase in revenues was stronger and the expenditure growth lower than initially planned. 
Last year’s budget projections have been retained with an expected deficit of ½ % of GDP in 
2013 and a balanced budget in 2014, which is broadly in line with the Commission’s spring 
2013 forecast of a deficit of 0.2 % of GDP for 2013 and a balanced budget for 2014 (see Table 
III in the annex). All levels of government are expected to register balanced budgets or even 
small surpluses as from 2014. 

The planned improvement in the government budget balance is driven by a decreasing 
expenditure-to-GDP  ratio  in  combination  with  a  stable  revenue  ratio.  Below-average 
growth  in  employee  compensation,  social  transfers  other  than  in  kind,  gross  fixed  capital 
formation (following above-average investment in previous years due to stimulus  packages) 

9 

 
and  interest  expenditure  is  projected  to  more  than  offset  above-average  growth  in  social 
transfers  in  kind,  in  particular  in  the  areas  of  health  care  and  long-term  care.  The  stability 
programme  factors  in  the  reduction  in  the  pension  contribution  rate  in  2013  as  well  as  the 
increase in the minimum income tax allowance (see Box 1). No significant one-off measures 
are foreseen during the programme period. Overall, the budgetary targets appear realistic. 

Box 1. Main measures 

The favourable budgetary development and the positive trends in wages and employment 
have led the federal government to reduce taxes, social insurance contributions and fees. 
Overall, this is expected to provide businesses and citizens with cost cuts of nearly EUR 
8 billion.  In  February  2013,  a  new  law  aimed  at  reducing fiscal drag  took  effect, which 
increases the basic income tax allowance from EUR 8004 to EUR 8130 in 2013 and EUR 
8354 in 2014, with a view to bringing it into line with the rise in minimum subsistence 
income, and stipulates regular biannual reporting on fiscal drag. The pension contribution 
rate has been reduced by 0.7 pps to 18.9 % in 2013, following a reduction by 0.3 pps in 
2012, which more than offsets the increase in the long-term care contribution rate by 0.1 
pps. This reduction results from applying a semi-automatic rule and reflects the pension 
insurance  scheme’s  currently  favourable  financial  situation.  Moreover,  the  quarterly 
EUR 10  fee  paid  by  patients  for  medical  treatment  (Praxisgebühr)  was  abolished  at  the 
beginning of this year. Measures with a limited budgetary impact include investing more 
in federal transport infrastructure as well as simplifying business taxation and the taxation 
of travel expenses.  

  Revenue 

Expenditure 

Main budgetary measures 

2013 

•  Reduction  in  the  pension  contribution 

•  n.a. 

rate (-0.2 % of GDP) 

•  Abolition of the quarterly fee for medical 

treatment (-0.1 % of GDP) 

•  Increase 

the  basic 
allowance (-0.1 % of GDP) 

in 

2014 

income 

tax 

•  n.a. 

  Note: The budgetary impact in the table is the impact reported in the programme, i.e. by the national 
authorities.  A  plus  sign  indicates  that  revenue/expenditure  increases  as  a  consequence  of  the 
measure. The degree of detail reflects the information made available in the stability programme and, 
where available, in a multiannual budget.  

• 

Germany registered a structural surplus of 0.3 % of GDP in 2012 and thus achieved its 
MTO in line with last year’s CSR. According to the stability programme, the (recalculated) 
structural surplus7 will stay at 0.3 % of GDP in 2013 and improve to 0.7 % of GDP in 2014, 
which  is  broadly  in  line  with  the  Commission’s  forecast  of  a  structural  surplus  of  0.4 %  of 
GDP in 2013 and 0.3 % of GDP in 2014. The structural balance is planned to remain positive 
in the following years. Hence, Germany plans to achieve its MTO throughout the programme 

7  

Cyclically adjusted balance net of one-off and temporary measures, recalculated by the Commission on 
the basis of the information provided in the programme, using the commonly agreed methodology. 

10 

 
 
 
 
 
 
 
 
 
 
                                                 
period.  Germany  complied  with  the  expenditure  benchmark  in  2012.  According  to  the 
information provided in the stability programme, the growth rate of government expenditure, 
net  of  discretionary  revenue  measures,  will  exceed  the  reference  medium-term  rate  of 
potential GDP growth in 2013 (1.16 %). However, the expenditure benchmark is not binding 
given  that  it  is  intended  to  underpin  the  necessary  adjustment  towards  the  MTO  (which 
Germany  plans  to  continue  to  comply  with).  Moreover,  the  programme  foresees  that  the 
growth rate of government expenditure will again be below the reference rate in 2014 (1.08 % 
of GDP). 

The  debt-to-GDP  ratio  increased  by  1.5  percentage  points  (pps)  to  81.9 %  in  2012, 
mainly due to the euro area stabilisation measures, and is planned to fall throughout the 
programme period thanks to the denominator effect of GDP growth and the winding up 
of ‘bad banks’. This is broadly in line with the Commission’s forecast of a debt-to-GDP ratio 
of 81.1 % in 2013 and 78.6 % in 2014, which does not take into account potential gains from 
the  winding  up  of  ‘bad  banks’  (see  Table  IV  in  the  annex).  Government  debt  is  above  the 
60 % of GDP threshold of the Stability and Growth Pact and, following the correction of the 
excessive  deficit  in  2011,  Germany  is  in  a  transition  period  under  the  debt  reduction 
benchmark.  In  2012,  Germany  made  sufficient  progress  towards  compliance  with  the  debt 
reduction benchmark at the end of the transition period. Given that compliance with the MTO 
also ensures compliance with the debt reduction benchmark, both the stability programme and 
the  Commission  forecast  indicate  that  Germany  will  make  sufficient  progress  towards 
compliance with the debt criterion in the years to come. 

Long-term sustainability 

Germany  does  not  appear  to  face  any  short-term,  medium-term  or  long-term 
sustainability  challenges.  The  medium-term  sustainability  gap8,  showing  the  adjustment 
effort up to 2020 required to bring debt ratios to 60 % of GDP in 2030, is at 0.3 % of GDP, 
significantly below the EU average of 2.2 % of GDP. This reflects a relatively strong initial 
structural  budgetary  position,  while  the  ageing  costs9  are  higher  than  the  EU  average.  The 
long-term sustainability gap10 shows the adjustment effort needed to ensure that the debt-to-
GDP  ratio  is  not  on  an  ever-increasing  path,  conditional  upon  achieving  the  relatively  high 
structural  primary  surplus  forecasted  for  2014  and  maintaining  it  afterwards.  For  Germany, 
this gap is at 1.4 % of GDP, which is much lower than the EU average (3 %). Also in the long-
term,  the  relatively  strong  initial  budgetary  position  contributes  to  offsetting  the  long-term 
age-related  expenditure  trends.  The  sustainability  gaps  would  be  higher  if  the  structural 
primary surplus of 2.6 % of GDP in 2014 were to revert to the lower values observed in the 
past,  such  as  the  average  for  the  period  1998–2012  of  1 %  of  GDP.  As  far  as  fiscal 
sustainability  is  concerned,  the  focus  should,  therefore,  be  on  reducing  government  debt. 

8  

9  

10  

See  Table  V.  The  medium-term  sustainability  gap  (S1)  indicator  shows  the  upfront  adjustment  effort 
required,  in  terms  of  a  steady  improvement  in  the  structural  primary  balance  to  be  introduced  until 
2020,  and  then  sustained  for  a  decade,  to  bring  debt  ratios  back  to  60 %  of  GDP  in  2030,  including 
financing for any additional expenditure until the target date, arising from an ageing population. 
Ageing costs comprise long-term projections of public age-related expenditure on pension, health care, 
long-term care, education and unemployment benefits. See the 2012 Ageing Report for details. 
See  Table  V.  The  long-term  sustainability  gap  (S2)  indicator  shows  the  immediate  and  permanent 
adjustment required to satisfy an inter-temporal budgetary constraint, including the costs of ageing. The 
S2 indicator has two components: i) the initial budgetary position (IBP) which gives the gap to the debt 
stabilising primary balance; and ii) the additional adjustment required due to the costs of ageing. The 
main assumption used in the derivation of S2 is that in an infinite horizon, the growth in the debt ratio is 
bounded  by  the  interest  rate  differential  (i.e.  the  difference  between  the  nominal  interest  and  the  real 
growth  rates);  thereby  not  necessarily  implying  that  the  debt  ratio  will  fall  below  the  60 %  of  GDP 
threshold of the Stability and Growth Pact. 

11 

 
                                                 
Moreover,  containing  further  age-related  expenditure  growth  would  contribute  to  the 
sustainability of public finances in the long term. 

In  line  with  the  AGS  and  last  year’s  recommendation  to  pursue  its  growth-friendly 
consolidation  course,  Germany  has  increased  expenditure  on  education  and  research 
and would benefit from further efforts in this respect. Public and private expenditure on 
education  and  research  reached  9.5 %  of  GDP  in  201011  and  appears  to  be  well  on  track  to 
achieve the national target of 10 % of GDP by 2015. Federal and Länder governments should 
ensure  that  the  target  will  be  met,  despite  the  consolidation  needs  resulting  from  the 
application of the debt brake. Even more ambitious follow-up targets may be needed to catch 
up  with  the  most  innovative  economies.12  Attention  should  also  be  paid  to  enhancing  the 
efficiency  of  government  spending  in  these  areas,  especially  by  improving  outcomes  in  the 
education system (see Section 3.3), and helping start-up companies to gain access to venture 
capital (Section 3.4). 

In contrast, Germany has made only limited efforts to improve the efficiency of public 
spending on healthcare and long-term care. At 8.6 % of GDP in 2010,13 the rate of public 
spending on healthcare in Germany is one of the highest in the EU and is likely to increase 
further  due  to  demographic  change  and  innovations  in  medical  technology;  this  could 
potentially  put  a  strain  on  public  finances  or  result  in  an  increasing  contribution  rate.  The 
reduction  in  pharmaceutical  expenditure  in  2011  resulted  mainly  from  temporary  ad  hoc 
rebates. In addition, the obligation to assess the added value of pharmaceuticals as the basis 
for price setting, introduced by the 2011 health reform, is expected to have a positive effect on 
expenditure  growth  in  the  future.14  The  quarterly  fee  paid  by  patients  for  medical  treatment 
(Praxisgebühr) was abolished at the beginning of 2013 on the grounds that it was ineffective 
and created red tape (see Box 1). Alternative means could have been considered to promote 
the more efficient use of medical services. The efficiency of health care could be improved by 
i) enhancing competition on the insurance market, while avoiding selection by morbidity risks 
and  ensuring  appropriate  health  services  across  the  country,  ii)  stimulating  competition  in 
health  service  provision  and  in  pharmaceutical  distribution,  iii)  better  integrating  inpatient, 
outpatient  and  rehabilitation  care  and  iv)  ensuring  that  care  delivery  and  reimbursement 
systems are focused more on the needs of patients and less on the supply of services.15 The 
reform of long-term care, which took effect this year and includes an extension of benefits to 
dementia  patients,  an  increase  in  the  contribution  rate  of  0.1 pps,  and  fiscal  incentives  for 
voluntary private insurance, is unlikely to be sufficient to cover future cost increases. 

11  

12  

13  
14  

15  

The 9.5 % share of GDP was made up of 7 % on education and 2.8 % on research and development, less 
the  amount  spent  on  research  and  development  at  universities  (which  is  included  in  education 
expenditure) (Statistisches Bundesamt (2012), Bildungsfinanzbericht 2012). 
The expert commission on research and innovation appointed by the federal government recommends 
increasing the expenditure targets to 8 % of GDP for education and 3.5 % for research and development 
by 2020 (Expertenkommission Forschung und Innovation (2013), Gutachten zu Forschung, Innovation 
und Technologischer Leistungsfähigkeit Deutschlands). 
Eurostat database. 
Henschke, C., L. Sundmacher and R. Busse (2013), Structural changes in the German pharmaceutical 
market: Price setting mechanisms based on the early benefit evaluation, Health Policy, Vol. 109: 263-
269. 
Sachverständigenrat  (2012),  Stabile  Architektur 
im  Inland, 
Jahresgutachten  2012/13;  Augurzky,  B.,  S.  Krolop,  R.  Gülker,  C.  Hentschker  and  C. M.  Schmidt 
(2012),  Krankenhaus  Rating  Report  2012:  Krankenhausversorgung  am  Wendepunkt?,  Medhochzwei 
Verlag;  Porter,  M. E.,  C.  Guth  (2012),  Redefining  German  Health  Care:  Moving  to  a  Value-Based 
System,  Springer  Berlin  Heidelberg;  European  Commission  and  the  Economic  Policy  Committee 
(2010), Joint report on health systems, European Economy Occasional Papers 74/2010. 

für  Europa  —  Handlungsbedarf 

12 

 
                                                 
Fiscal framework 

There  has  been  some  progress  in  the  implementation  of  the  constitutional  balanced-
budget  rule  (‘debt  brake’)  since  last  year’s  CSR,  although  most  Länder  have  not  laid 
down implementing rules. The debt brake stipulates that both the federation and the Länder 
should have structurally balanced budgets from 2016 and 2020, respectively. However, more 
specific legal provisions appear to be required to ensure an effective application of the debt 
brake in the annual budgetary procedure. Such detailed provisions for the federal budget have 
been laid down in the federal constitution and in implementing rules. This has not been done 
to the same extent at Länder level, which is the sole responsibility of the Länder themselves. 
So far, six Länder have enshrined reinforced balanced budget rules in their constitutions and 
five Länder in their budget laws.16 Only Rhineland-Palatinate, Lower Saxony and Schleswig-
Holstein  have  laid  down  implementing  rules.  Lower  Saxony  and  Schleswig-Holstein  have 
defined decreasing annual borrowing ceilings for the transition period until 2020. Rhineland-
Palatinate  and  Schleswig-Holstein  have  specified  provisions  for  preventing  recourse  to 
financial  transactions,  correcting  the  deficit  for  the  impact  of  the  business  cycle,  applying 
exemption  clauses  for  natural  disasters  and  other  emergencies,  and  using  a  control  account 
that records deviations in budget execution from the authorised level of borrowing as debits or 
credits, which reduce or increase the permitted level of net borrowing in the following year. 

Moreover, in 2012 the federal government adopted a draft law aimed at transposing the 
Treaty on Stability, Coordination and Governance. Accordingly, it sets the ceiling for the 
general government structural deficit at Germany’s MTO of 0.5 % of GDP as defined in the 
Stability  and  Growth  Pact,  while  the  Länder  are  made  responsible  for  their  municipalities. 
Compliance  with  the  national  deficit  ceiling  will  be  monitored  by  the  existing  Stability 
Council,  which  consists  of  the  federal  and  Länder  ministers  of  finance  and  the  federal 
minister of economics. It will be supported by an independent advisory board that publishes 
statements on compliance with the deficit ceiling and recommendations for corrective action 
in the event of non-compliance.17 The draft law also covers the sanctions that may be imposed 
on the federal government and the Länder under the reformed preventive arm of the Stability 
and Growth Pact. 

In  view  of  considerable  consolidation  needs  in  several  Länder,18  the  application  of  the 
debt brake and the Treaty on Stability, Coordination  and  Governance  would  be  made 
more effective if fiscal relations between the different layers of government were more 
efficient.  In  particular,  budget  consolidation  could  be  facilitated  by  exploring  ways  to 
enhance  fiscal  responsibility  and  accountability; this  could  be  done  by  disentangling  shared 
tax  revenues  and  by  reducing  disincentives  to  improve  revenues  for  both  contributor  and 
beneficiary  Länder  in  the  horizontal  fiscal  equalisation  system.  The  expiry  in  2019  of  the 
current provisions for the fiscal equalisation system as well as of the special transfers from the 

16  

17  

18  

Hamburg,  Hessen,  Lower  Saxony,  Mecklenburg-Western  Pomerania,  Rhineland-Palatinate  and 
Schleswig-Holstein  have  enshrined  debt  brakes  in  their  respective  constitutions  and  Baden-
Württemberg,  Bavaria,  Saxony,  Saxony-Anhalt  and  Thuringia  in  their  budget  laws.  Berlin, 
Brandenburg,  Bremen,  North  Rhine-Westphalia  and  Saarland  have  not  enshrined  reinforced  balanced 
budget rules in Länder legislation. 
The  advisory  board  will  consist  of  one  representative  each  from  the  Bundesbank,  the  Council  of 
Economic  Experts  (Sachverständigenrat  zur  Begutachtung  der  gesamtwirtschaftlichen  Entwicklung), 
and the institutes that prepare the joint economic forecast, as well as experts appointed by the federal 
and Länder governments, the associations of local authorities and the social security institutions. 
The  Sachverständigenrat  (2011,  Verantwortung  für  Europa  wahrnehmen,  Jahresgutachten  2011/12) 
estimates the consolidation needs across all Länder until 2020, as a weighted average compared to the 
base years 2007 to 2010, at 9 % of current primary expenditure. Consolidation needs range from zero in 
Bavaria to more than 20 % in Saarland, Bremen and Berlin. 

13 

 
                                                 
federal budget to the eastern Länder under the Solidarity Pact II may therefore give rise to a 
comprehensive review of fiscal relations. 

Tax system 

Germany  has  made  limited  progress  in  addressing  the  inefficiencies  in  the  tax  system 
identified in the 2012 SWD. In line with the priorities of the AGS, the country could benefit 
from reducing the tax burden on labour, notably for low-wage and second earners, narrowing 
the  use  of  the  reduced  value-added  tax  (VAT)  rate,  increasing  revenues  from  recurrent 
property  taxes,  lowering  tax  expenditures,  in  particular  those  with  environmentally  harmful 
effects, and further reducing the corporate tax bias towards debt-financing. 

Limited efforts have been made as regards the recommendation to reduce the high tax 
wedge in a budget-neutral way, in particular for low-wage earners. The high tax burden 
on labour discourages some people from participating in the labour market or increasing the 
number  of  hours  they  work.19  The  tax  wedge  for  workers  earning  50 %  and  67 %  of  the 
average  wage  is  among  the  highest  in  the  EU  (single  person  without  children,  data  for 
2012).20 Inactivity and unemployment traps are also relatively high. Germany has adopted a 
law  aimed  at  reducing  fiscal  drag,  which  implies  a  slight  increase  in  the  basic  income  tax 
allowance (see Box 1). However, the law falls short of the initial proposal to also adjust the 
tax scale and to introduce a biannual review to limit unintended across-the-board tax increases 
due to inflation, as is already in place in many Member States. The reduction in the pension 
contribution  rate  also  contributes  to  a  lower  tax  burden  on  labour.  However,  this  reduction 
results from applying a semi-automatic rule rather than to structural adjustments (see Box 1). 
Health insurers are expected to cover cost increases by flat-rate contributions combined with 
compensation for low-income earners through the tax system, which would lower the impact 
on labour costs. However, this has not been necessary so far due to the favourable financial 
situation  of  the  health  fund.  Overall,  the  burden  of  social  contributions  remains  below  the 
federal government’s target of 40 % of gross wages and salaries. 

to 

the 

joint 

Germany has not taken action in response to last year’s recommendation to phase out 
the significant fiscal disincentives for second earners. Second earners still face significant 
fiscal  disincentives  due 
for  married  couples 
(Ehegattensplitting)  and  the  free  health-insurance  coverage  for  non-working  spouses,  as 
pointed  out  in  the  2012  SWD.21  Together  with  other  factors, fiscal  disincentives  discourage 
women in particular from participating in the labour market or increasing the number of hours 
they work. The NRP does not announce any measure in this regard. The evaluation of taxation 
and social benefits related to marriage and family announced in the 2012 NRP might provide 
valuable  information  for  reforms  aimed  at  increasing  the  effectiveness  and  efficiency  of 
family policy in the coming years. 

taxation  of 

income 

A  reduction  in  the  tax  burden  on  labour  could  be  paid  for  by  tapping  more  growth-
friendly revenue sources. The application of the reduced VAT rate (currently 7 %) to what is 
now  quite  a  wide  range  of  goods  and  services  could  be  narrowed  and  VAT  administration 

19  

20  
21  

The  fact  that  labour  taxes  and  social  contributions  account  for  a  relatively  high  proportion  of  total 
revenues could also result in a smaller revenue base in the longer term, because of the shrinking active 
labour force. 
Commission estimate based on OECD tax and benefits model. 
The high share of women among mini-job workers is also related to the joint income taxation system. 
While income below the mini-job threshold of EUR 400 per month (EUR 450 as of 2013) is exempted 
from income tax, if the income is above that threshold, the full income is subject to the (joint) income 
tax. Bundesministerium für Familie, Senioren, Frauen und Jugend (2012), Frauen im Minijob. 

14 

 
                                                 
reviewed  in  an  effort  to  increase  efficiency,  improve  tax  collection  and  fight  fraud.22 
Reassessing the tax base of the municipal recurrent real estate tax (Grundsteuer), which dates 
back to market values of 1963/64 or even before, would contribute to improving the fairness 
in  the  distribution  of  the  tax  burden  and  to  increasing  the  particularly  low  revenues  from 
recurrent  property  taxes  (0.5 %  of  GDP  in  2011  vs  1.3 %  in  the  EU-27).  Moreover,  there  is 
still  scope  for  reducing  inefficient  tax  expenditures,  especially  those  with  environmentally 
harmful  effects  such  as  energy  tax  reductions  and  exemptions,  the  favourable  taxation  of 
company  cars  or  the  commuter  income  tax  deduction.  Energy  and  electricity  tax  reductions 
for  energy-intensive  businesses  have  been  extended  beyond  2012  on  condition  that  the 
beneficiaries  introduce  energy  audit  systems  and  the  sectors  concerned  achieve  predefined 
energy efficiency targets. It should be a priority to limit those reductions to a minimum. 

Conditions  for  investment  in  Germany  could  be  further  improved  by  reducing  the 
corporate  tax  bias  towards  debt-financing  and  reforming  the  local  trade  tax 
(Gewerbesteuer). Despite the ʻinterest barrierʼ (Zinsschranke) limiting the deductibility of net 
interest expenses (on all kinds of debt financing), there remains a corporate tax bias towards 
debt-financing.  Inefficiencies  arise  from  the  trade  tax  due  to  the  inclusion  of  non-profit 
elements in the tax base. 

3.2. 

Financial sector 

The German financial sector has undergone significant adjustment since the outbreak of 
the  financial  and  sovereign  debt  crisis  and  has  become  more  resilient.  Between  spring 
2008 and the third quarter of 2012, the twelve major German banks increased their ʻcore tier 1 
capitalʼ from 8.3 % to 13.6 % of the risk-weighted assets.23 The loan-to-deposit ratio is below 
the euro area average, while a low ratio of non-performing loans indicates solid bank assets. 
The level of private sector indebtedness is below the euro-area average and appears moderate. 
Businesses  (including  small  and  medium  sized  enterprises)  still  have  very  good  access  to 
finance and there are no indications of significant tightening of lending conditions,24 although 
access to venture capital remains underdeveloped (see Section 3.4). Lending conditions also 
remain very favourable for private households, even though credit standards for housing loans 
have recently been tightened somewhat. In addition to stricter capital requirements, German 
banks  face  increased  competition  in  domestic  markets  and  a  growing  number  of  businesses 
are  having  recourse  to  capital  markets  without  bank  intermediation.  Low  interest  rates  may 
also pose a challenge for institutional investors, notably insurance companies. 

Since  last  year’s  CSR  to  address  the  remaining  structural  weaknesses  in  the  financial 
sector,  Germany  has  strengthened  financial  sector  supervision  and  has  taken  steps  to 
align  itself  with  the  new  EU  regulatory  framework.  An  Act  to  Strengthen  German 
Financial Supervision (Gesetz zur Stärkung der deutschen Finanzaufsicht), which entered into 
force  on  1 January 2013,  is  expected  to  improve  the  cooperation  between  supervisory 
authorities  and  the  alignment  of  microprudential  and  macroprudential  oversight.  It  has 
established  the  Financial  Stability  Board  (Ausschuss  für  Finanzstabilität),  which  consists  of 
the  Bundesbank, 
the  Federal  Financial  Supervisory  Authority 
für 
Finanzdienstleistungsaufsicht  —  BaFin)  and  the  Federal  Ministry  of  Finance  and  can  issue 

(Bundesanstalt 

22  

23  
24  

As regards VAT reform options, see for example Präsident des Bundesrechungshofes (2013), Chancen 
zur Sicherung des Umsatzsteueraufkommens. Vorschläge zur Umsetzung wichtiger Reformvorhaben bei 
der Umsatzsteuer. 
Deutsche Bundesbank (2012), Financial stability review 2012. 
European  Central  Bank  (2013),  Bank  lending  survey;  European  Central  Bank  (2013),  Survey  on  the 
access  to  finance  of  SMEs  in  the  euro area;  Deutsche  Bundesbank (2013),  Monthly  Report  February 
2013; Ifo Institute (2013), Ifo Business Survey. 

15 

 
                                                 
warnings  or  recommendations  based  on  Bundesbank  analysis.  Moreover,  the  federal 
government  recently  adopted  several  draft  laws  aimed  at  completing  the  regulatory 
framework.  These  laws  deal  with  extending  supervision  to  alternative  investment  funds, 
strengthening independent investment counselling, preventing risks related to high frequency 
trading, improving supervision of financial conglomerates, facilitating liquidation of financial 
institutions  based  on  recovery  and  resolution  plans,  and  separating  commercial  from 
investment  banking.  In  addition,  new  criminal  law  rules  have  been  brought  in  to  deal  with 
gross  violations  of  their  risk  management  duties  by  top  executives.  As  for  the  Financial 
Market Stabilisation Fund (Sonderfonds Finanzmarktstabilisierung — Soffin), which provides 
capital or guarantees to ailing institutions, this has been extended until 2014. 

Although  Commission  state  aid  decisions  have  continued  to  drive  the  ad  hoc 
restructuring of Landesbanken since last year’s CSR, including individual mergers, the 
overall  structure  of  the  sector  remains  fragmented.  In  2012,  as  a  result  of  Commission 
state  aid  decisions,  WestLB  was  wound  up  and  BayernLB  and  NordLB  had  to  reduce  their 
balance  sheets,  abandon  certain  business  activities  and  divest  non-core  subsidiaries. 
Amending the corporate structure of and reducing political influence in Landesbanken could 
further facilitate a market-driven consolidation. Moreover, consolidation in the public banking 
sector could be supported by reviewing the legal structure of the savings banks and allowing 
their  acquisition  by  Landesbanken  or  private  banks,  while  safeguarding  the  savings  banks’ 
business model, which has proven to be so stable during the crisis. 

The German housing market has gained momentum in recent years, although risks for 
financial stability appear to be limited for the time being. House prices have been rising 
since  2009,  especially  in  urban  centres,  on  the  back  of  favourable  income  prospects,  low 
interest  rates  and  a  flight  of  investment  into  safe  assets.  Households’  robust  debt 
sustainability,  the  moderate  growth  in  mortgage  lending,  the  favourable  labour  market  and 
cautious  lending  standards  limit  the  risks  to  financial  stability.  However,  sustained  low 
interest rates and high liquidity call for housing market developments to be closely monitored. 

3.3. 

Labour market, education and social policies 

The  German  labour  market  continues  to  work  well,  but  there  is  scope  to  improve  the 
situation of some people. The Europe 2020 target of a 77 % employment rate was close to be 
achieved  in  2012  (76.7 %),  and  at  5.5 %  in  2012  unemployment  remains  at  a  low  level, 
although in some Länder the unemployment rate is above 10 %. Germany is making efforts to 
attract skilled workers from abroad, including from Member States with a high level of youth 
unemployment.  Activating  the  untapped  labour  and  skills  potential  of  the  domestic  labour 
pool in line with the 2012 CSR is necessary for mitigating the impact of demographic change, 
as acknowledged in the NRP. It would also contribute to higher employment and disposable 
income, thus strengthening domestic demand and supporting rebalancing. 

In  2012,  the  Council  Recommendation  for  Germany  contained  a  CSR  concerning 
reforms in the labour market and education policies. The CSR called for reforms to reduce 
the  tax  wedge,  in  particular  for  low-wage  earners;  maintain  activation  and  integration 
measures, in particular for the long-term unemployed; create the conditions for wages to grow 
in line with productivity; raise the educational achievement of disadvantaged groups through 
equal  opportunities;  phase  out  fiscal  disincentives  for  second  earners;  and  increase  the 
availability of full-time childcare facilities and all-day schools. 

Germany  is  making  progress  in  integrating  the  remaining  long-term  unemployed  into 
the labour market but further efforts are needed.  The number of long-term unemployed 

16 

 
markedly decreased during the second half of the last decade, but there are still more than one 
million  long-term  unemployed  and  their  integration  into  the  labour  market  is  increasingly 
difficult.25 It is therefore important to assess how effective the 2011 reform of labour market 
instruments  has  been  in  further  integrating  the  remaining  long-term  unemployed,  and  to 
continue efforts to integrate them. 

Germany  has  made  limited  efforts  to  reduce  the  high  tax  wedge  for  low-wage  earners 
and has not taken action to phase out the significant fiscal disincentives faced by second 
earners  (see  Section  3.1).  Progress  in  increasing  the  availability  of  full-time  childcare 
facilities appears insufficient to meet the estimated needs and remains limited regarding 
the  availability  of  all-day  schools.  These  factors  are  reflected  in  a  low  share  of  women 
working full-time and one of the lowest numbers of hours worked on average by women in 
the EU, despite a relatively high female employment rate. This contributes to a high gender 
pay gap and lower pension entitlements for women as compared with men, particularly in the 
western  Länder.26  Progress  in  increasing  the  provision  of  childcare  facilities  is  slow  and 
Germany is unlikely to deliver on its commitments in this area on time. In order to achieve a 
significantly  higher  share  of  full-time  female  labour  participation,  more  efforts  may  be 
required  in  the  future,  possibly  also  regarding  the  number  and  flexibility  of  care  hours.27 
Involving the private sector more in the provision of childcare facilities may also be explored. 
Given  the  relevance  of  early  childhood  education  and  care  to  subsequent  educational 
performance,  it  appears  equally  important  to  ensure  high-quality  early  childhood  education 
and care provision by, for example, improving the qualifications of staff.28 The NRP does not 
envisage any specific measures in this regard. The effects of the new allowance for families 
with children under three who do not make use of formal childcare facilities (Betreuungsgeld) 
need to be monitored, as it may create an additional disincentive to work for parents and the 
risk  that  more  children,  especially  from  low-income  families,  will  not  participate  in  early 
childhood  education  and  care.  The  number  of  all-day  schools  continues  to  increase,  but  the 
percentage of pupils who attend them remains low at 28 %29 and in the afternoon such schools 
often  only  offer  supervision  or  non-compulsory  training.  This  suggests  significant  room  for 
improving the potential contribution of all-day schools to high quality education. 

Germany  is  making  some  progress  in  raising  the  educational  achievement  of 
disadvantaged people and thus the efficiency of spending on education. The country has 
made some progress in tackling educational disadvantage during the last decade including by 
targeted  prevention  and  corrective  measures  both  at  the  federal  and  Länder  level,  such  as 

25  

26  

27  

28  

29  

According to the Federal Employment Agency, in 2011 around half of the long-term unemployed had 
no  vocational  training  and  40 %  of  them  were  50  years  or  older  (Bundesagentur  für  Arbeit  (2011): 
Sockel- und Langzeitarbeitslosigkeit). 
In  2010,  Germany  had  the  third  highest  gender  pay  gap  in  the  EU-27,  well  above  the  EU  average 
(22.3 % and 16.2 % respectively). The gender pay gap in the eastern Länder is much lower than in the 
western Länder (8 % and 24 %, respectively in 2012). According to the Federal Statistical Office, two 
thirds of the gender differences in average hourly earnings are explained by the different professional 
choices  made  by  men  and  women,  differences  in  the  degree  of  responsibilities  and  other  job 
requirements, and other factors such as the high incidence of part-time work among women. 
In the western Länder, 20 % of children below three years old are cared for in childcare facilities, less 
than 40 % of them full-time. 30 % of children between three and six in childcare facilities are cared for 
full-time  (70 %  in  the  eastern  Länder).  (Data  for  2011;  see  KMK  and  BMBF  (2012),  Bildung  in 
Deutschland 2012). 
Only 3 % of staff in childcare centres (Tageseinrichtungen) have a relevant tertiary degree. Around one 
third of staff in day-care centres (Tagespflege) have followed a pedagogical training, while 41 % have 
had less than 160 hours of training or no training. (Data for 2011; see KMK and BMBF (2012), Bildung 
in Deutschland 2012). 
Data for 2010 (see KMK and BMBF (2012), Bildung in Deutschland 2012). 

17 

 
                                                 
initiatives aimed at promoting early language learning,30 improving children’s reading skills 
or  better  integrating  disadvantaged  young  people  into  their  social  environment.  All  Länder 
should continue ambitious efforts to create a school system that provides equal opportunities 
for  all.  The  country  is  not  far  from  achieving  its  national  target  of  reducing  early  school 
leaving  to  less  than  10 %  by  2020  (10.5 %  in  2012),  but  progress  is  slow  and  the  rate  for 
foreign-born  students  is  still  significantly  worse  (21.9 %  in  2011).  Better  education 
opportunities  for  people  with  a  migration  background  should  in  time  improve  their  labour 
market  performance.  Awareness-raising  actions  aimed  at  reducing  gender  differences  in 
educational and professional choices such as the ‘Girl’s Days’ are welcome, but may not be 
sufficient.31 Moreover, lower secondary education does not always sufficiently prepare young 
people  to  start  vocational  training  and  businesses  report  difficulties  in  filling  vacant 
apprenticeship positions with sufficiently skilled people. The implementation of the extended 
National Training Pact (Ausbildungspakt) should alleviate some shortcomings of the  system 
supporting the transition from lower-secondary education to (dual) vocational and educational 
training (Übergangssystem). Higher participation in tertiary education is mainly explained by 
the shorter duration of upper secondary school, which temporarily creates double cohorts of 
students.  But  measures  to  help  people  with  dual  vocational  education  and  training 
qualifications  gain  access  to  higher  education  and  additional  financial  support  for  students 
also contribute to a positive trend towards higher participation in tertiary education. Despite 
some  progress  in  increasing  adult  participation  in  lifelong  learning,  Germany  still  performs 
below the EU average (7.9 % and 9 % respectively in 2012), and it is not doing enough to help 
workers  —  particularly  older  workers  —  to  renew  or  upgrade  their  skills.  Participation  is 
particularly  low  among  low-skilled,  unemployed  and  foreign-born  people.  The  strategy  for 
literacy and basic adult education introduced in 2011 should be monitored. It is important to 
ensure  that  the  education  system  provides  students  with  the  skills  that  are  necessary  to 
facilitate  their  integration  into  the  labour  market,  in  particular  in  fast-changing  sectors,  and 
that it encourages entrepreneurship (see also section Research and Innovation). 

Wages have risen significantly in recent years in line with the 2012 CSR, although not 
everyone has benefitted to the same extent from these developments. Following a decade 
of  declining  real  unit  labour  costs  in  Germany,  real  wages  have  increased  stronger  than 
productivity  since  the  beginning  of  the  crisis.  Disparities  in  gross  wages  among  income 
groups continued to rise in the second half of the last decade, but to a lower extent than in the 
first  half.32  Wage  moderation  had  contributed  to  an  increasing  share  of  capital  income  in 
relation to labour income in gross added value, but this trend has reversed since 2008, most 
likely due to the favourable development of employment and wages as well as lower returns 
of  capital  investments.  Real  unit  labour  costs  are  expected  to  continue  increasing,  given 
significant  increases  in  wages,  moderate  employment  growth  and  the  projected  economic 
recovery. Wage developments are therefore expected to continue to contribute to re-adjusting 

30  

31  

32  

The  federal  campaign  ‘Early  opportunities  —  focus  on  language  and  integration’  (Offensive  Frühe 
Chancen — Schwerpunkt Sprache und Integration) specifically promotes German language learning at 
childcare facilities. 
According  to  the  Federal  Statistical  Office  in  2010  16 %  of  the  female  high  education  students  in 
Germany took courses on mathematics, informatics, science or technology, compared with 46 % of the 
male students. The difference between the female and male shares has increased compared with 2001 
and  remains  one  of  the  highest  in  the  EU.  See  Destatis  (2012),  Frauen  und  Männer  auf  dem 
Arbeitsmarkt. 
See Federal Statistical Office, 2012, Niedriglohn und Beschaeftigung 2010, press conference September 
2012  and  DIW,  2011,  Schwache  Lohnentwicklung  im  letzten  Jahrzehnt,  DIW  Wochenbericht,  45. 
According to the latter study, the tax and social security system mitigate the increase in disparities in 
gross wages to a significant extent. 

18 

 
                                                 
macroeconomic imbalances in the euro area as well as to raise living standards in Germany, 
also benefitting from past structural reforms and adjustments. 

Building  on  the  positive  results  of  the  last  decade’s  reforms,  it  is  important  to  further 
improve  the  integration  of  all  groups  into  the  labour  market,  also  with  a  view  to 
improving  their  income,  while  preserving  employment.  An  important  element  of  the 
reforms was the injection of greater flexibility into the labour market, resulting in an increased 
use of non-regular contracts, including mini-jobs, part-time, fixed-term or temporary agency 
work.33  The  group  of  people  working  in  mini-jobs  is  very  heterogeneous.34  For  many  (e.g. 
students, pensioners), mini-jobs provide them with an additional income. On the other hand, 
the  favourable  fiscal  conditions  of  mini-jobs  may  create  some  distortions  by,  for  instance, 
discouraging  people  —  especially  second  earners  (see  section  3.1,  Tax  System)  —  from 
increasing  the  number  of  hours  they  work,  or  companies  from  opting  for  other  types  of 
contract.35 Therefore, it seems appropriate to assess whether there is a need to correct some 
features of the current system. Moreover, in-work poverty has risen in the last years, which 
also increases the risk of old-age poverty rising in the future. There is an on-going debate on 
the possibility of introducing some kind of wage floor or minimum wage in Germany.36 Wage 
floors could  increase the income of low-wage earners, but would have a positive impact on 
the overall income of workers only if they do not lead to significant job losses.37 

3.4. 

Structural measures promoting growth and competitiveness 

In  2012,  the  Council  Recommendation  for  Germany  contained  a  CSR  concerning 
reforms  in  the  energy,  railway  and  services  sectors.  The  CSR  called  for  reforms  to 
minimise the economic costs of transforming the energy system and to stimulate competition 
in  railway  markets  and  in  the  services  sectors,  including  professional  services  and  certain 
crafts, in particular in the construction sector. 

Internal market, liberalisation and competition 

33  

34  

35  

36  

37  

According  to  the  Federal  Statistical  Office,  in  2010  20.6 %  of  all  employees  and  almost  half  of  the 
employees with non-regular contracts earned less than EUR 10.36 per hour (two thirds of the median 
earnings). 
Of the 7.5 million people with mini-jobs at the end of 2011, almost two thirds (4.9 million, two thirds of 
them women) had only the mini-job; the rest (2.6 million) also had a job subject to social contributions 
(and  they  constituted  9 %  of  all  employees  subject  to  those  contributions).  Out  of  the  4.9  million 
working only in mini-jobs, 35 % were housewives/husbands, 22 % pensioners, 20 % students and 11 % 
unemployed.  Almost  50 %  of  the  employees  interviewed  were  satisfied  with  their  situation  and  27 % 
were searching for more work (25 % would have liked to work more but could not for some reason). 
Students  and  pensioners  in  particular  are  unlikely  to  be  interested  in  a  regular  job,  while  73 %  of  the 
unemployed  would  like  to  work  more.  Körner,  T.,  Meinken,  H.  and  Puch,  K.  (2013),  Wer  sind  die 
ausschließlich  geringfügig  Beschäftigten?  Eine  Analyse  nach  sozialer  Lebenslage.  Statistisches 
Bundesamt, Wirtschaft und Statistik. 
Hohendanner, C. and Stegmaier, J. (2012) provide some evidence that regular jobs are crowded out by 
mini-jobs,  in  particular  in  small  companies.  Hohendanner,  C.  and  Stegmaier,  J.  (2012),  Umstrittene 
Minijobs, IAB-Kurzbericht 24/2012. 
In  contrast  to  most  Member  States  there  is  no  statutory  minimum  wage  in  Germany,  but  there  are 
minimum wages in twelve sectors, including the temporary employment sector. The hairdressing sector 
recently agreed to introduce a wage floor. 
The economic impact of minimum wages depends on multiple factors, including the level, the setting 
mechanism,  the  possibility  of  differentiating  minimum  wages  (e.g.  across  Länder  or  sectors),  the 
interaction  with  the  benefits  system,  and  the  characteristics  of  the  sectors  concerned  (price  elasticity, 
complementarity  with  other  products,  share  of  labour  in  total  costs,  previous  remuneration  structure, 
level of competition, etc.). 

19 

 
                                                 
Policy action to improve competition in line with the 2012 CSR has been limited and the 
NRP does not announce new actions. Reforms to improve competition could contribute to 
the reallocation of resources and help boost investment in non-tradable sectors, strengthening 
the shift in the composition of growth towards domestic demand. 

The  situation  in  the  services  sectors  has  not  changed  significantly  since  last  year  and 
there  continue  to  be  restrictions  on  accessing  and  exercising  certain  professions,  but 
Germany has not announced any actions in its 2013 NRP to address them. In many craft 
sectors,  including  in  the  construction  sector,  there  is  still  a  requirement  to  hold  a  master 
craftsman’s  certificate  (Meisterbrief)  or  an  equivalent  qualification  in  order  to  run  a  craft 
business.  Building  on  the  experience  of  the  2004  reform,  Germany  could  consider  whether 
this requirement is still justified in all cases and explore more targeted ways of ensuring that 
services  are  provided  safely.  The  construction  sector  also  faces  restrictions  as  regards 
commercial communication and authorisation procedures. Many professional services are also 
subject to legal form and shareholding requirements. Germany could assess whether the same 
public  interest  objectives  could  not  be  reached  with  lighter  regulation.  The  diversity  of 
regulatory regimes across Länder also suggests there is scope for further efforts to identify the 
least burdensome regulatory approaches and extend them throughout the country, thus cutting 
red  tape  for  businesses.  Moreover,  despite  long-standing  plans  to  review  the  regulatory 
framework in the postal sector, Germany has not made progress and the postal mail market is 
still dominated by the incumbent operator. It is important that the review is not delayed any 
further  and  the  regulator  is  given  additional  instruments,  especially  for  price  and  access 
control.  While  the  German  retail  sector  is  performing  well  overall,  in  some  cases  planning 
regulations may unduly restrict new entries into the market (e.g. by requiring economic needs 
tests),  and  discriminate  against  certain  types  of  retailer.  Urban  planning  objectives  such  as 
retaining supply areas in the city centres should be pursued in a competition-neutral manner.38 

The  situation  in  the  railway  sector  has  not  changed  significantly  since  last  year’s 
recommendation. Germany has adopted a draft law (Eisenbahnregulierungsgesetz) aimed at 
streamlining the principles of network access, easing market access for railway undertakings 
and  granting  greater  powers  to  the  regulator.  Moreover,  it  has  partially  opened  the  long-
distance passenger travel market to bus connections, which may enhance competition in the 
passenger  sector.  Germany  has  also  undertaken,  albeit  with  some  delay,  to  introduce  the 
Europe-wide  rail  signalling  system  ERTMS.  This  should  also  stimulate  competition  in  the 
transport  sector  by  facilitating  cross-border  rail  traffic.  However,  despite  these  positive 
developments,  competition  in  the  rail  markets  remains  very  limited.39  Given  Germany’s 
central  geographical  position,  this  has  an  impact  on  the  whole  European  railway  system. 
Improving  the  level  of  independence  of  the  infrastructure  manager  could  have  a  positive 
impact on competition in the rail markets.40 

There  is  scope  for  improving  the  institutional  framework  for  more  competition.  The 
legislative process involving the revision of the Act against Competition Restrictions, which 
should  enhance  effective  enforcement  of  competition  law,  has  not  yet  been  concluded.  In 
addition, Germany could benefit from strengthening the institutional set-up to ensure effective 
control  over  state  aid  by,  for  example,  introducing  transparency  mechanisms  or  setting  up 
bodies to check the eligibility of aid awards. Furthermore, the value of the contracts published 

38  

39  

40  

See, for example, Monopolkommission (2012), Neunzehntes Hauptgutachten der Monopolkommission 
2010/2011. 
In  2011,  the  market  share  of  new  entrants  was  less  than  1 %  and  13 %  in  long-distance  and  regional 
passenger transport respectively, and 26 % in freight transport. These markets were opened in 1994. 
See,  for  example,  Monopolkommission  (2011),  Bahn  2011:  Wettbewerbspolitik  unter  Zugzwang,  60. 
Sondergutachten der Monopolkommission. 

20 

 
                                                 
by the German authorities under EU procurement legislation is comparatively low, suggesting 
scope for improvement. 

Energy 

Germany  is  on  track  to  comply  with  its  Europe  2020  renewable  energy  target  and  its 
climate target subject to the implementation of additional measures. Germany is likely to 
comply with its renewable energy targets before 2020. According to the latest projections, the 
country  will  achieve  the  target  regarding  greenhouse  gas  emissions  in  sectors  outside  the 
Emissions  Trading  Scheme  subject  to  the  implementation  of  additional  measures.  However, 
Germany is pursuing a major transformation of the energy system to achieve more ambitious 
climate  and  energy  targets  by  2050,  including  a  substantial  increase  of  renewables  in  the 
energy mix.41 

Policy action aimed at minimising the overall economic costs of transforming the energy 
system  in  line  with  last  year’s  recommendation  has  not  yet  led  to  tangible  results  and 
potential  major  risks  and  inefficiencies  remain.  Despite  measures  taken  in  the  past  —  
including controlling the costs of promoting solar energy — the surcharge paid by electricity 
consumers  to  compensate  renewables  producers  for  their  higher  production  costs  (EEG-
Umlage) has increased by 47 % in 2013 as compared with 2012. Moreover, large sections of 
the  industry  benefit  from  several  exemptions  which  add  to  the  electricity  bill  of  other 
industrial  consumers  and  households  and  tend  to  distort  price  signals.  Increasing  the  cost-
effectiveness  of  the  system  to  promote  renewable  energy,  including  by  ensuring  that 
electricity  prices  send  the  right  signals  to  all  consumers,  remains  a  challenge.  The  NRP 
reiterates  plans  for  a  fundamental  review  of  the  Renewable  Energy  Act,  which  is  welcome 
and  should  not  be  further  delayed.  The  government  had  also  proposed  measures  to  contain 
electricity price increases in the short term, but the plans have not been adopted as agreement 
could not be reached with all relevant parties.42 Moreover, the government has adopted a draft 
law  setting  more  ambitious  standards  for  energy  efficiency  in  new  buildings,  but  there  is  a 
need for action to increase energy efficiency in existing buildings as well. Past developments 
suggest that Germany will have to make a significant effort to meet its commitment to reduce  
energy consumption. 

Germany is making efforts to accelerate the expansion of the networks, which is lagging 
behind.  Expanding  and  upgrading  the  electricity  grid  and  providing  additional  storage  and 
flexible  generation  capacities  are  pre-requisites  for  the  expansion  of  renewables.  Given  the 
increasing renewable energy production capacities in the North Sea and Baltic Sea areas and 
the reduced nuclear capacity in the more industrial southern Länder, steps need to be taken to 
expand  the  internal  north-south  axis,  develop  an  offshore  grid,  and  expand  connections  to 
neighbouring  countries  to  avoid the  negative  impacts  of  unscheduled  flows.  There  has  been 
progress in improving the conditions for accelerating the expansion of the electricity network 
since last year’s CSR. In particular, in 2012 the federal government adopted a draft national 
demand  plan  (Bundesbedarfsplan)  following  upon  the  ten-year  network  development  plan 
(Netzentwicklungsplan).  The  plan  aims  at  accelerating  the  approval  and  administrative 

41  

42  

The  Energy  Concept  (Energiekonzept)  of  2010  set  climate  and  energy  targets  up  until  2050.  The 
‘energy  turnaround’  (Energiewende)  introduced  following  the  Fukushima  nuclear  disaster  in  March 
2011 provides for the phase-out of all nuclear plants by 2022. Renewable energy is subsidised through a 
feed-in tariff system to compensate renewable producers for the difference between the production cost 
and the market price. 
The  government  plans  included  the  introduction  of  a  statutory  limit  to  the  yearly  increase  in  the 
renewables surcharge of 2.5 %. The plans did not specify which measures would be taken in case this 
limit would be insufficient to compensate renewable energy producers. 

21 

 
                                                 
procedures  by  drawing  up  a  list  of  projects  which  are  deemed  necessary.  Moreover,  the 
regulator will be in charge of planning and approval procedures for grids across Länder and 
cross-border grids. Germany also agreed on a future liability regime for offshore wind farm 
grid connection and an offshore grid development plan. It is important to continue with these 
efforts,  as  the  first  monitoring  report  on  the  ‘energy  turnaround’  shows  that  actual 
developments  are  lagging  behind.  Progress  has  also  been  achieved  in  developing  the  gas 
network,  but  further  enhancements  are  necessary  to  improve  interconnectivity  with 
neighbouring countries, including reverse flows, and new north-south and east-west transport 
capacity. 

More needs to be done to coordinate Germany’s energy policy with that of neighbouring 
countries. The transformation of the country’s energy system also affects its neighbours, in 
particular  given  its  geographical  position.  Lack  of  coordination  may  impact  negatively  on 
neighbouring  countries  and  the  European  energy  market  by  increasing  costs,  distorting 
competition  or  reducing  security  of  supply.  Closer  coordination  of  energy  policies  between 
Germany and its neighbours would help prevent unnecessary problems and make it easier to 
benefit from the European energy market, as illustrated by the recent agreement between the 
German and Polish grid operators regarding coordinated mechanisms to increase cross-border 
capacities between both countries. 

Research and innovation 

Germany is one of the EU’s innovation leaders but it could still do more. As pointed out 
in the 2012 SWD, although Germany is one of the innovation leaders in the EU and is already 
close  to  achieving  its  R&D  expenditure  target  of  3 %  of  GDP  (see  section  3.1),  other 
economies  are  investing  even  more  in  research  and  innovation.  Moreover,  significant 
disparities remain at regional level in terms of R&D investments and innovation performance, 
underlining the need for smart specialisation strategies at the regional level. 

Bottlenecks for start-up companies are hindering the development of high-tech sectors. 
Fast-growing,  innovative  start-up  companies in information and communication technology, 
biotechnology and other high-tech sectors continue to face bottlenecks such as skills shortages 
and  lack  of  finance,  including  from  venture  capital  and  business  angels.  The  federal 
government  already  supports  start-up  companies  with  financing  instruments,  but  there  is  a 
need  to  further  improve  the  regulatory  framework  and  to  stimulate  private  investment.  It  is 
also  important  to  adapt  the  educational  system  to  the  changing  requirements  of  technology 
and  innovation  by  developing,  for  example,  entrepreneurship  and  knowledge  transfer. 
Germany has taken initiatives aimed at attracting and retaining students and academics from 
abroad,  but  more  efforts  are  needed  to  use  the  female  talent  in  science  and  technology 
throughout the different stages of the research career.43 

3.5.  Modernisation of public administration 

The business environment is generally favourable, but could still be further improved in 
certain areas. The NRP does not announce any additional concrete measures in this respect. 
Germany  systematically  assesses  the  administrative  burden  associated  with  newly  proposed 
regulations  at  federal  level.  Despite  efforts  to  further  reduce  the  administrative  burden, 
estimated  compliance  costs  have  increased  overall  by  EUR  1.3 billion  since  2011.44 

43  

44 

See Expertenkommission Forschung and Innovation (2013), Gutachten zu Forschung, Innovation and 
technologischer Leistungsfähigkeit Deutschlands. 
See Nationaler Normenkontrollrat, Monitor Erfüllungsaufwand. 

22 

 
                                                 
 
Moreover, not all measures agreed in December 2011 by the federal government have been 
implemented  yet.  Defining  a  new  target  for  additional  simplification  measures  could  help 
stimulate the process. Positive developments have recently been noted for example in respect 
of standards for e-government and electronic invoicing. In general, small and medium-sized 
enterprises  in  particular  would  benefit  from  further  simplification  of  the  tax  system. 
Moreover,  there  may  be  room  for  further  improvement  with  respect  to  the  time  and  cost  of 
starting a business and obtaining the necessary licences. The availability of online procedures 
could also be further improved and the limitations of the points of single contact, which differ 
across Länder in terms of procedures or the information they provide, should be addressed. 

23 

 
4. 

OVERVIEW TABLE 

2012 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

CSR  1:  Continue  with  sound  fiscal  policies  to  achieve 
the MTO by 2012. To this end, implement the budgetary 
strategy  as  envisaged,  ensuring  compliance  with  the 
expenditure  benchmark  as  well  as  sufficient  progress 
towards compliance with the debt reduction benchmark. 
Continue  the  growth-  friendly  consolidation  course 
through  additional  efforts  to  enhance  the  efficiency  of 
public  spending  on  healthcare  and  long-term  care,  and 
by using untapped potential to improve the efficiency of 
the  tax  system;  use  available  scope  for  increased  and 
more efficient growth-enhancing spending on education 
and  research  at  all  levels  of  government.  Complete  the 
implementation of the debt brake in a consistent manner 
relevant 
across  all  Länder,  ensuring 
monitoring procedures and correction mechanisms. 

timely  and 

Significant  progress  in  achieving  fiscal  targets  and 
implementing  the  budgetary  strategy  as  envisaged. 
The  general  government  budget  produced  a  small 
surplus and the MTO was met in 2012. 

Limited progress in further enhancing the efficiency 
of public spending on healthcare and long-term care 
and of the tax system. 

Germany appears to be well on track with respect to 
the  national  target  on  education  and  research 
expenditure,  but  may  consider  more  ambitious 
follow-up targets. 

Limited  progress  in  the  implementation  of  the 
in 
constitutional  debt  brake  at  Länder 
particular  with  respect  to  specifying  implementing 
rules. 

level, 

CSR 2: Address the remaining structural weaknesses in 
the financial sector, inter alia, by further restructuring of 
those Landesbanken which are in need of an adequately 
funded  viable  business  model  while  avoiding  excessive 
deleveraging. 

Significant progress in strengthening the regulatory 
and supervisory framework in the financial sector. 

Progress in restructuring of Landesbanken based on 
Commission state aid decisions.  

and 

activation 

appropriate 

CSR  3:  Reduce  the  high  tax  wedge  in  a  budgetary 
neutral  way,  in  particular  for  low-wage  earners,  and 
maintain 
integration 
measures,  in  particular  for  the  long-term  unemployed. 
Create  the  conditions  for  wages  to  grow  in  line  with 
productivity.  Take  measures  to  raise  the  educational 
achievement  of  disadvantaged  groups,  in  particular 
through  ensuring  equal  opportunities  in  the  education 
and  training  system.  Phase  out  the  fiscal  disincentives 
for  second  earners,  and  increase  the  availability  of 
fulltime childcare facilities and all-day schools. 

CSR  4:  Continue  efforts  to  keep  the  overall  economic 
costs of  transforming  the  energy  system  to  a  minimum, 
including  by  accelerating  the  expansion  of  the  national 
and  cross-border  electricity  and  gas  networks.  Ensure 
that 
institutional  set-  up  guarantees  effective 
competition  in  railway  markets.  Take  measures  to 
further  stimulate  competition  in  the  services  sectors, 
including  professional  services  and  certain  crafts,  in 
particular in the construction sector. 

the 

24 

Limited progress to reduce the high tax wedge. 

Insufficient  progress  on  integrating  the  long-term 
unemployed into the labour market. 

Significant progress in wage growth. 

Insufficient  progress  in  raising  the  educational 
achievement of disadvantaged groups. 

No  progress on phasing  out fiscal  disincentives  for 
second earners. 

Progress  in  increasing  the  availability  of  full-time 
childcare  facilities    is  insufficient  to  meet  the 
estimated needs. Progress regarding the availability 
of all-day schools remains limited. 

Insufficient  progress  in  minimising  the  costs  of 
transforming the energy system. 

Some  progress 
accelerating the expansion of the networks. 

in  setting 

the  conditions  for 

Limited  progress  in  ensuring  competition  in  the 
railway markets. 

Limited  progress  in  stimulating  competition  in  the 
service sectors. 

 
Europe 2020 (national targets and progress) 

Employment rate target: 77 % of the population aged 20-
64. 

Employment  rate  of  women:  71.5 %  in  2012 
(national target: 73 %). 

Employment  rate  of  the  population  aged  20-64: 
76.7 % in 2012. 

Employment  rate  of  the  population  aged  55-64: 
61.5 % in 2012 (national target: 60 %). 

R&D target: 3 % of GDP. 

R&D expenditure: 2.84 % of GDP in 2011. 

Greenhouse  gas  emissions  target:  -14 %  (compared  to 
2005  emissions,  ETS  emissions  are  not  covered  by  this 
national target). 

Renewable energy target: 18 % 

Share of renewable energy in the transport sector: 10 % 

Indicative national energy efficiency target: reduction of 
primary energy consumption by 20 % compared to 2008. 

Early school leaving target: < 10. 

Tertiary  education  target:  42 %  of  the  population  aged 
30-34. 

Change  in  non-ETS  greenhouse  gas  emissions 
between  2005  and  2011:  -9 %.  According  to  the 
latest  national  projections 
the 
Commission  and 
into  account  existing 
measures, the target is expected to be missed: -10 % 
in 2020 compared with 2005. 

submitted 

taking 

to 

Share  of  renewable  energy  in  gross  final  energy 
consumption:  12.3 %  in  2011  (6.1 %  in  transport. 
Only formally reported compliant biofuels with Art. 
17 and 18 of Directive 2009/28/EC are included). 

of 

Germany  has  set  an  indicative  national  energy 
efficiency  target  in  accordance  with  Articles  3  and 
24 
the  Energy  Efficiency  Directive 
(2012/27/EU). However, Germany has not specified 
the  target  in  terms  of  an  absolute  level  of  primary 
and final energy consumption in 2020, as required, 
and  has  not  provided  information  on  which  data 
basis the target has been calculated. 

Early leavers from education and training: 10.5 % of 
the  population  aged  18-24  in  2012  (provisional 
data). 

Tertiary  education  attainment:  42.2 %  in  2011 
(including  ISCED  4,  considered  as  equivalent  to 
tertiary  attainment  and  included  in  the  national 
target). 

Risk  of  poverty  or  social  exclusion 
target:  20 % 
reduction  in  the  number  of  long-term  unemployed  by 
2020  compared  with  2008  (i.e.  reduction  by  320.000 
long-term unemployed). 

Reduction in the long-term unemployed: 430.000 in 
2012 compared with 2008. 

25 

 
 
 
 
 
5. 

ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General Government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2009

2010

2011

2012

2013

2014

1.6
-0.2
1.0
1.6
9.0
21.3
20.9

-3.9
59.1
-32.5
45.8
49.7
3.4

1.1
0.1
1.5
0.1
9.0
19.0
20.6

-2.7
62.1
-40.2
44.5
47.2
3.0

0.7
-0.4
1.8
0.6
9.1
17.9
24.3

-1.6
68.6
-46.8
44.0
45.6
2.8

4.2
-1.0
1.2
2.6
7.1
17.4
23.6

-4.1
82.4
-50.0
43.6
47.7
2.5

3.0
0.7
2.5
2.6
5.9
18.1
23.9

-0.8
80.4
-51.5
44.5
45.3
2.6

0.7
0.0
2.1
-0.4
5.5
17.6
23.6

0.2
81.9
n.a
45.2
45.0
2.5

0.4
-1.0
1.8
0.2
5.4
17.4
22.9

-0.2
81.1
n.a
45.2
45.4
2.4

1.8
-0.5
1.6
1.9
5.3
17.6
22.8

0.0
78.6
n.a
45.1
45.1
2.3

-0.3

-0.9

1.8

4.3

1.1

0.8

1.4

1.3

n.a
n.a
8.8
23.3

n.a
n.a
8.7
22.7

n.a
n.a
9.5
23.2

-56.0
-3.8
10.6
24.8

-52.7
-6.8
11.2
22.3

-51.9
-1.4
11.5
21.1

-52.3
3.7
10.3
24.2

-59.4
4.1
9.9
24.7

5.3
n.a
42.6
14.3
21.0
11.4

3.3
86.9
43.6
11.0
22.5
11.0

5.2
122.1
41.8
14.1
21.1
11.3

6.0
125.1
41.4
13.8
22.0
11.7

5.0
100.9
43.1
12.0
23.0
10.8

6.0
117.9
40.9
14.1
22.0
11.6

Net financial assets; non-financial corporations
Net financial assets; financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between the actual and potential gross domestic product at 2005 market prices.
2 The indicator on domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two weeks. 
The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

5.6
-16.9
5.1
1.9
0.0
42.0
47.4
4.1
94.6
96.9
115.2

6.1
-15.3
5.6
2.0
0.0
41.2
48.4
4.0
94.3
99.2
111.3

6.3
n.a
5.7
1.9
-0.1
41.9
47.5
4.1
93.4
96.3
119.5

-0.9
-0.5
1.0
-0.9
0.0
41.5
48.9
5.6
115.3
102.3
91.7

1.4
0.7
3.2
-0.7
0.1
41.7
48.4
4.2
100.5
100.3
96.0

6.0
n.a
5.5
1.7
0.0
n.a
n.a
n.a
97.2
96.0
123.0

6.3
n.a
5.7
1.8
-0.1
n.a
n.a
n.a
96.5
96.1
120.8

6.2
-8.5
5.8
1.7
0.0
41.6
48.1
3.7
97.2
99.3
105.4

4.7
n.a
43.3
14.6
20.4
10.9

5.1
n.a
43.2
14.3
20.7
11.2

Source :
Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

26 

 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of 
the world (% of GDP)

2012
COM SP
0.7
0.6
-2.5
3.7
1.8

0.7
0.6
-2.5
3.7
1.8

2013
COM SP
0.4
0.6
0.5
2.8
3.5

0.4
0.8
-0.6
2.2
2.1

2014
COM SP
1.6
1.0
4.1
4.4
4.5

1.8
1.4
3.9
6.2
7.0

2015
SP
1.4
1.2
2.8
4.8
5.3

2016
SP
1.4
1.2
2.8
4.8
5.3

2017
SP
1.4
1.2
2.8
4.8
5.3

0.2
-0.5
1.0
0.0
1.1
5.5
-0.4
2.1
1.3
2.5
6.3

-0.3
-0.5
1.0
0.0
1.1
5.3
-0.4
n.a.
1.3
2.5
6.3

0.7
-0.4
0.2
-1.0
0.5
5.4
-0.1
1.8
1.5
2.4
6.3

0.6
0.0
-0.1
-1.0
0.0
5.4
0.4
n.a.
1.8
2.3
6.2

1.8
0.0
0.0
-0.5
0.5
5.3
1.3
1.6
1.7
3.1
6.0

1.5
0.0
0.2
-0.8
0.2
5.1
1.4
n.a.
1.7
2.7
6.2

1.4
0.0
0.0
-0.5
0.2
4.9
1.2
n.a.
1.6
2.5
6.0

1.4
0.0
0.0
-0.2
0.2
4.6
1.2
n.a.
1.6
2.5
5.9

1.4
0.0
0.0
0.1
0.2
4.4
1.2
n.a.
1.6
2.5
5.7

Note:
1In percent of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme scenario 
using the commonly agreed methodology.

Source :

Commission services’ 2013 spring forecasts (COM); Stability programme (SP).

27 

 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

2012

2013

2014

2015

2016

2017

Change: 
2012-2017

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

Compensation of employees and
intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs

Output gap

2

Cyclically-adjusted balance

2

3
Structural balance (SB)
Change in SB
Two year average change in SB 

3

Structural primary balance
Change in structural primary balance
Expenditure benchmark

Applicable reference rate

4

COM COM SP
45
45.2
45.2

1
COM
45.1

11.3
12.1
17.0
4.8
45.0

11.3
12.3
16.9
4.8
45.4

11½
12½
17
4.7
45½

11.2
12.4
16.8
4.8
45.1

SP
45

11
12½
16½
4.6
44½

SP
45

11
12½
16½
4.4
44½

42.5

43.0

43

42.9

42

42

12.6

12.9

12½

12.9

12½

12½

24.4
0.9
1.5
3.1
2.5
0.2
2.6
-0.1
0.3

0.0

0.2

0.3
1.3
1.3

2.8

24.6
0.9
1.5
3.1
2.4
-0.2
2.3
0.0
-0.2

-1.0

0.4

0.4
0.1
0.7

2.8
0.0

24½
1
1½
3
2½
-½
2
0
-0.3

-1.0

0.3

0.3
0.0
0.6

2.7
-0.1

24.5
0.9
1.5
3.1
2.3
0.0
2.3
0.0
0.0

-0.5

0.3

0.3
-0.1
0.0

2.6
-0.2

24½
1
1½
3
2½
0
2½
0
0.2

-0.8

0.7

0.7
0.4
0.2

3.0
0.3

24½
1
1½
3
2½
0
2½
0
0.2

-0.5

0.5

0.5
-0.2
0.1

2.8
-0.2

SP
44½

11
13
16½
4.3
44½

42

12

24½
1
1½
3
2½
½
2½
0
0.4

-0.2

0.5

0.5
0.0
-0.1

2.8
0.0

SP
44½

11
13
16½
4.2
44

42

12

24½
1
1½
3
2
½
3
0
0.6

0.1

0.6

0.6
0.1
0.0

2.8
0.0

0.01

1.16

1.16

1.08

1.08

1.08

1.08

n.a.

SP
-0.6

-0.5
0.8
-0.3
-0.6
-1.0

-0.7

-0.5

0.2
0.1
-0.1
-0.1
-0.3
0.4
0.2
0.1
0.3

0.1

0.4

0.3
-
-

0.0
-

-

5

-0.2

-0.2

0.6

 (% GDP)

Deviation
Two-year average deviation (% GDP)
Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services 
on the basis of the programme scenario using the commonly agreed methodology.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.

-0.2

-0.1

-0.7

-0.2

-0.1

n.a.

0.0

0.1

-
-

0.0

-0.4

0.0

-0.2

n.a.

4 Reference medium-term rate of potential GDP growth. The (standard) reference rate applies from year t+1, if the country has reached its 
M TO in year t. A lower  rate applies as long as the country is adjusting towards its M TO, including in year t.The reference rates applicable 
to 2014 onwards have been updated in 2013. 
5 Deviation of the growth rate of public expenditure net of discretionary revenue measures and revenue increases mandated by law from the 
applicable reference rate. The expenditure aggregate used for the expenditure benchmark is obtained following the commonly agreed 
methodology. A positive sign implies that expenditure growth exceeds the applicable reference rate. 

Source :
Stability programme (SP); Commission services’ 2013 spring forecasts (COM); Commission services’ calculations.

28 

 
 
 
Table IV. Debt dynamics 

(% of GDP)

Gross debt ratio1
Change in the ratio
Contributions 2 :

1. Primary balance

2. “Snow-ball” effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. Stock-flow adjustment

Of which:

Cash/accruals diff.

Acc. financial assets

Privatisation

Val. effect & residual

5,6

Gap to the debt benchmark
Structural adjustment7
To be compared to:
Required adjustment8
Notes:

Average
2007-2011

73.9

2.5

-1.1

1.0

2.7

-0.9

-0.7

2.6

2012

81.9

1.5

-2.6

0.9

2.5

-0.5

-1.0

3.2

2013

2014

COM

81.1

-0.8

-2.3

0.9

2.4

-0.3

-1.2

0.6

SP

80½

-1.5

-2.1

0.6

2.4

-0.3

-1.5

0.0

COM

78.6

-2.5

-2.3

-0.5

2.3

-1.4

-1.3

0.3

SP

77½

-2.7

-2.5

-0.2

2.3

-1.2

-1.3

0.1

2015
SP

75

-2.9

2016
SP

71½

-3.1

2017
SP

69

-2.8

-2.5

0.1

2.3

-1.1

-1.2

-0.4

-2.6

0.0

2.2

-1.0

-1.1

-0.5

-2.8

0.1

2.2

-1.0

-1.1

-0.1

2013

2014

2015

2016

2017

2012

n.r.

1.2

COM / 
3

SP

n.r.

0.0

-0.1

-1.1

SP4

n.r.

0.0

-1.1

COM / 
3

SP

-4.4

n.r.

n.r.

SP4

-4.1

n.r.

n.r.

SP

-4.3

n.r.

SP

-4.4

n.r.

n.r.

n.r.

SP

n.r.

n.r.

n.r.

1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth and 
inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual accounting, 
accumulation of financial assets and valuation and other residual effects. 

3 Assessment of the consolidation path set in SP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the SP assuming growth follows the SP projections.
5Not relevant for M ember Sates that were subject to an EDP procedure in November 2011 and for a period of three years following the 
correction of the excessive deficit.
6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, projected gross debt-to-GDP ratio does not 
comply with the debt reduction benchmark.
7Applicable only during the transition period of three years from the correction of the excessive deficit for EDP that were ongoing in 
November 2011.

8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State will 
comply with the debt reduction benchmark at the end of the transition period, assuming that COM  (SP) budgetary projections for the 
previous years are achieved.

Source :

Stability programme (SP); Commission services’ spring 2013 forecasts (COM); Commission services’ calculations.

29 

 
 
Table V. Sustainability indicators 

S2

of which:

Initial budgetary position (IBP)

Long-term cost of ageing (CoA)

of which:

Pensions

Health care

Long-term care

Others

S1 (required adjustment)*

of which:

Initial budgetary position (IBP)

Debt requirement (DR)

Long-term cost of ageing (CoA)

S0 (risk for fiscal stress)**

Debt,  % of GDP (2012)

Age-related expenditure, % of GDP (2012)

DE

EU27

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

1.4

-1.1

2.4

1.5

0.9

0.1

0.0

-0.3

-2.1

1.1

0.7

1.2

-1.3

2.4

1.4

0.8

0.1

0.1

-0.9

-2.5

0.7

0.9

3.0

0.8

2.2

1.0

0.9

0.6

-0.4

2.2

0.0

1.9

0.3

0.02

81.9

24.8

:

87.0

25.8

1.3

-0.9

2.2

1.1

0.8

0.6

-0.3

0.5

-1.8

1.9

0.4

Note: 
The 'No-policy change' scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the Commissions' spring 2013 forecast until 2014. The 'Programme (SCP)' scenario depicts the sustainability gap 
under the assumption that the budgetary plans in the programme are fully implemented.                                                                 
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.               
** The critical threshold for the S0 indicator is 0.44.

Source : 
Commission services; 2013 stability programme.                                                                                                   

30 

 
 
 
3
1

S
C
P
s
c
e
n
a
r
i
o

C
O
M
c
o
n
s
o

l
i

d
a
t
i
o
n
s
c
e
n
a
r
i
o
(
1
%
p
e
r

y
e
a
r

o
n
S
B

)

i

n
o
r
d
e
r

t

i

o
a
c
h
e
v
e
M
T
O

C
O
M
c
o
n
s
o

l
i

d
a
t
i
o
n
s
c
e
n
a
r
i
o
(
0
.
5
%
p
e
r

y
e
a
r

o
n
S
B

)

i

n
o
r
d
e
r

t

i

o
a
c
h
e
v
e
M
T
O

0

1
0

2
0

3
0

4
0

5
0

6
0

7
0

8
0

9
0

(

%
o
f

G
D
P

)

G

r
o
s
s
d
e
b
t

a
s
%
o
f

G
D
P

-

D
E

-

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m

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y

c
h
a
n
g
e
s
c
e
n
a
r
i
o

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

C
O
M
+
S
h
o
c
k

(
+
1
p
.
p
.

C
O
M
+
S
h
o
c
k

(

-
1
p
.
p
.

i

n
t
h
e
s
h
o
r
t
-
t
e
r
m

/
l
o
n
g
-
t
e
r
m

i

n
t
e
r
e
s
t

t

t

r
a
e
o
n
m
a
u
r
i
n
g
a
n
d
n
e
w
d
e
b

t

i

n
t
h
e
s
h
o
r
t
-
t
e
r
m

/
l
o
n
g
-
t
e
r
m

i

n
t
e
r
e
s
t

t

r
a
e
o
n
m
a

t

u
r
i
n
g
a
n
d
n
e
w
d
e
b

t

f
r
o
m
2
0
1
5
)

f
r
o
m
2
0
1
5
)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table VI. Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)

38.9

38.6

38.9

39.3

37.9

38.7

2002

2006

2008

2009

2010

2011

Breakdown by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

              - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth

     p.m.  Environmental taxes

2

3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

10.4

10.2

10.7

11.2

10.7

10.9

6.4

0.8

2.2

1.0

6.4

0.8

2.0

1.0

7.1

0.7

1.8

1.0

7.5

0.7

1.9

1.1

7.2

0.7

1.8

1.0

7.3

0.7

1.8

1.1

20.7

19.0

18.9

19.4

18.7

19.0

2.9

3.8

1.1

2.5

2.9

5.4

1.1

2.4

2.7

5.6

1.1

2.2

2.9

4.8

1.1

2.3

2.8

4.7

1.0

2.2

2.6

5.1

1.1

2.3

56.5

56.9

55.6

55.5

54.8

55.6

Note: 
1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission 
(2013) Taxation trends in the European Union, for a more detailed explanation.

2 This category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.
3 The VAT efficiency is measured via the VAT revenue ratio. The VAT revenue ratio is defined as the ratio between the actual VAT revenue collected and the 
revenue that would theoretically be raised if VAT was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due 
to large exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection 
gap'). See European Commission (2012), Tax reforms in EU M ember States, European Economy 6/2012 and Taxation Papers 34/2012 for a more detailed 
explanation.

Source: Commission

32 

 
 
 
Table VII. Financial market indicators 

2008

2009

2010

2011

2012

Total assets of the banking sector (% of GDP)

319.1

313.2

332.7

323.7

311.2

Share of assets of the five largest banks (% of total assets)

Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans)1)
              - capital adequacy ratio (%) 2)
              - return on equity (%) 3)
Bank loans to the private sector (year-on-year % change)

Lending for house purchase (year-on-year % change)

Loan to deposit ratio

CB liquidity as % of liabilities
Banks' exposure to countries receiving official financial assistance  (% of GDP)4)
Private debt (% of GDP)
Gross external debt (% of GDP)5)
            - Public
            - Private

Long term interest rates spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*
Notes: 

22.7

11.5

2.9
13.6

-2.5

4.4

-0.6

89.6

4.9

17.0

25.0

10.8

3.3
14.8

5.0

0.0

0.2

87.6

3.6

16.6

32.6

…

3.2
16.1

8.8

0.0

0.7

85.6

1.9

12.4

33.5

…

3.0
16.4

...

2.0

1.2

83.3

1.3

10.1

…

…

...
17.3

...

1.1

1.9

82.5

1.2

8.4

107.3

111.3

107.5

103.2

102.4

34.7
37.8

0.0

21.7

38.8
39.9

0.0

37.5

43.5
41.2

0.0

39.8

49.0
42.5

0.0

65.6

50.3
43.4

0.0

68.8

1)  Latest data (December 2011). M ethodological break in 2009 due to changes in the regulatory reporting framework for the audit of banks.
2)  Latest data (September 2012).
3)  Latest data (December 2010). Only domestically incorporated deposit-takers are included, along with their dependent domestic and foreign 
4) Covered countries are CY, EL, ES, LV, HU, IE, PT and RO.
5) Latest data 2012Q3.
* M easured in basis points.

Source :

Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

33 

 
 
 
Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment (% of total employment, 
15 years and more)
Part-time employment of women  (% of women employment, 15 
years and more)
Part-time employment of men  (% of men employment, 15 years 
and more)
Fixed term employment (% of employees with a fixed term 
contract, 15 years and more)
Transitions from temporary 
to permanent employment
Unemployment rate1 (% of labour force, 
age group 15-74)
Long-term unemployment rate2 (% of labour force)
Youth unemployment rate 
(% of youth labour force aged 15-24)
Youth NEET rate (% of population aged 15-24)

Early leavers from education and training (% of pop. 18-24 with at 
most lower sec. educ. and not in further education or training)

Tertiary educational attainment (% of population 30-34 having 
successfully completed tertiary education)
Formal childcare (from 1 to 29 hours; % over the population less 
than 3 years)
Formal childcare (30 hours or over; % over the population less 
than 3 year)
Labour productivity per person employed (annual % change)

Hours worked per person employed  (annual % change)
Labour productivity per hour worked (annual % change; constant 
prices)

Compensation per employee (annual % change; constant prices)

Nominal unit labour cost growth (annual % change)

Real unit labour cost growth (annual % change)

2007

2008

2009

2010

2011

2012

72.9

74.0

74.2

74.9

76.3

76.7

1.4

71.1

81.4

59.9

26.6

45.7

10.3

14.7

:

5.9

2.8

8.6

7.5

1.1

71.6

81.8

61.5

26.7

45.7

10.5

13.9

:

5.5

2.5

8.2

7.7

1.7

66.7

79.1

51.3

26.1

46.1

9.4

1.2

67.8

80.1

53.7

25.9

45.7

9.3

0.1

68.7

79.6

56.1

26.1

45.4

9.6

0.6

69.6

80.1

57.7

26.2

45.5

9.7

14.6

14.7

14.5

14.7

2.2

8.7

4.9

11.9

8.9

12.5

26.5

8.0

9.0

1.5

-0.1

1.7

-0.8

-0.8

-2.3

2.5

7.5

4.0

10.6

8.4

11.8

27.7

10.0

9.0

-0.1

0.0

-0.1

1.3

2.3

1.5

3.2

7.1

3.4

9.9

8.3

2.5

7.8

3.5

11.2

8.8

11.1

11.9

11.7

10.5

29.4

29.8

30.7

31.9

7.0

7.0

9.0

12.0

13.0

15.0

-5.2

-2.7

-2.5

-1.0

5.6

4.4

3.6

1.7

1.8

1.4

-1.1

-2.0

1.6

0.0

1.6

2.2

1.4

0.6

:

:

-0.4

-0.7

0.3

1.0

2.9

1.6

Notes:
1 Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within 
two weeks. The labour force is the total number of people employed and unemployed.

2 Long-term unemployed are unemployed persons for at least 12 months.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

34 

 
 
Expenditure on social protection benefits (% of 
GDP)
Sickness/Health care

Invalidity

Old age and survivors

Family/Children

Unemployment

Housing and Social exclusion n.e.c.

Total

of which:  means tested benefits
Social inclusion indicators
At-risk-of-poverty or social exclusion1 
(% of total population)
At-risk-of-poverty or social exclusion of children 
(% of people aged 0-17)
At-risk-of-poverty or social exclusion of elderly 
(% of people aged 65+)
At-Risk-of-Poverty rate2 (% of total population)
Severe Material Deprivation3  (% of total population)
Share of people living in low work intensity households 4 (% of 
people aged 0-59)
In-work at-risk-of poverty rate (% of persons employed)
Impact of social transfers (excluding pensions) on reducing 
poverty
Poverty thresholds, expressed in national currency at constant 
prices5
Gross disposable income (households)
Relative median poverty risk gap (60% of median equivalised 
income, age: total)

2006

2007

2008

2009

2010

8.10

2.32

11.90

2.88

1.85

0.65

27.87

3.48

8.03

2.22

11.44

2.77

1.55

0.61

26.80

3.28

8.27

2.27

11.43

2.83

1.44

0.58

26.98

3.25

9.70

2.44

12.20

3.16

1.90

0.65

30.23

3.58

9.49

2.41

11.85

3.20

1.70

0.63

29.44

0.00

2007

2008

2009

2010

2011

20.6

19.7

16.8

15.2

4.8

11.4

7.5

38.7

20.1

20.1

15.5

15.2

5.5

11.6

7.1

37.2

20.0

20.4

16.0

15.5

5.4

10.8

6.8

35.7

19.7

21.7

14.8

15.6

4.5

11.1

7.2

35.5

19.9

19.9

15.3

15.8

5.3

11.1

7.7

37.1

10666

10743

10609

10710

10730

1608980

1653050

1647450

1695520

1751070

23.2

22.2

21.5

20.7

21.4

Notes:
1 People at-risk-of poverty or social exclusion (AROPE): individuals who are at-risk-of poverty (AROP) and/or suffering from severe 
material deprivation (SM D) and/or living in household with zero or very low work intensity (LWI).
2 At-risk-of poverty rate (AROP): share of people with an equivalised disposable income below 60% of the national equivalised median 
income. 
3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or utility bills, ii) keep their 
home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein equivalent every second day, v) enjoy a week of 
holiday away from home once a year, vi) have a car, vii) have a washing machine, viii) have a colour tv, or ix) have a telephone.
4 People living in households with very low work intensity: share of people aged 0-59 living in households where the adults (excluding 
dependent children) work less than 20% of their total work-time potential during the previous 12 months.

5 For EE, CY, M T, SI, SK, thresholds in nominal values in Euros; HICP -  index 100 in 2006 (2007 survey refers to 2006 incomes)

Sources: 
For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC.

35 

 
 
 
 
Table IX. Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, steam and 
air conditioning supply (annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Total number of patent2 applications per million of 
labour force

2003-
2007

1.6

5.8

-0.1

-0.7

2008

2009

2010

2011

2012

-0.1

-5.2

3.6

-4.6

-19.9

21.5

1.6

6.3

-0.4

-2.3

3.3

0.4

6.2

-6.9

2.7

5.6

-8.2

n.a.

2.9

-3.8

573.7

546.4

536.9

524.9

n.a.

n.a.

Policy indicators

Enforcing contracts 3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

2003-
2007
398

31

2.5

2008

2009

2010

2011

2012

394

18

2.7

394

18

2.8

394

15

2.8

394

15

2.8

26.1

27.7

29.4

29.8

30.7

4.57

4.57

5.06

n.a.

n.a.

394

15

n.a.

n.a.

n.a.

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

2007

2008

2009

2010

2011

2012

n.a.

n.a.

1.3

2.4

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1.1

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1 Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Total number of patent applications to the European Patent Office (EPO) per million of labour force
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 

4 The methodologies of the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.
5 Aggregate Energy, Transport and Communications Regulation (ETCR).
*figure for 2007.

Source :
Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

36 

 
 
 
Table X. Green Growth 

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users**
Gas prices for medium-sized industrial users***
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS*
Transport energy intensity
Transport carbon intensity
Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €

%
HHI
HHI
%

2002-
2006

0.17
0.48
0.62
n.a.
-2.2%
n.a.
n.a.
11.2%
6.6%

0.12
10.3
n.a.
n.a.
n.a.
n.a.
60.8%
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.

2007

2008

2009

2010

2011

0.15
0.43
0.58
n.a.
-2.4%
11
1.4
10.5%
5.7%

0.11
10.8
0.10
0.04
0.03%
0.02%
74.7%
49.9%
0.48
1.21

58.1%
0.13
0.24
7.7%

0.15
0.43
0.57
0.16
-3.5%
12
8.6
10.2%
5.7%

0.11
10.9
0.11
0.05
0.03%
0.02%
76.7%
48.5%
0.46
1.15

60.5%
0.12
0.25
7.8%

0.15
0.42
0.57
n.a.
-2.5%
12
-2.6
10.3%
5.9%

0.11
3.1
0.11
0.04
0.04%
0.03%
77.2%
47.0%
0.50
1.25

61.5%
0.13
0.24
8.5%

0.15
0.42
n.a.
0.16
-2.9%
12
-0.8
10.3%
5.8%

0.12
n.a.
0.12
0.04
0.04%
0.03%
76.2%
48.2%
n.a.
n.a.

59.8%
0.13
0.24
9.7%

0.14
n.a.
n.a.
n.a.
-3.7%
12
7
n.a.
n.a.

n.a.
n.a.
0.12
0.05
0.04%
0.02%
n.a.
49.1%
n.a.
n.a.

61.1%
n.a.
0.24
9.9%

Country-specific notes: 
The year 2012 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN elaborations indicated below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Electricity and gas prices medium industrial users: consumption band 500  - 2000M Wh and 10000 - 100000 GJ;  figures excl. VAT.
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transp industry gross value added (2005 EUR)
Transport carbon intensity:  greenhouse gas emissions in transport activity divided by gross value added of the transport sector
Energy import dependency: net energy imports divided by gross inland energy consumption incl. energy consumption international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share renewable energy in energy mix: %-share in  gross inland energy consumption, expressed in tonne oil equivalents

*Provisional data (15 April 213). Commission Services and EEA.

** For 2007 average of S1 & S2 for DE, LU, NL, FI, SE & UK. Other countries only have S2.

*** For 2007 average of S1 & S2 for IT, NL, FI, SE & UK. Other countries only have S2.

37