KEEP THE GROWTH OF DOMESTIC LIQUIDITY UNDER STRICT CONTROL , AND TO MAINTAIN INTEREST RATES AT A RELATIVELY HIGH LEVEL .
AS A RESULT OF THE CHANGES MADE SINCE 1979 IN THE INDEXATION SYSTEM , AND THE MODERATION OF DEMANDS BY MANAGEMENT AND UNIONS , THE INCREASE IN NOMINAL INCOMES HAS BEEN SLOWED DOWN SOMEWHAT . THIS TREND MUST BE MAINTAINED IN THE FUTURE : OTHERWISE THE AUTHORITIES COULD WELL BE OBLIGED TO APPLY MORE RESTRICTIVE POLICIES , IN THE INTERESTS OF INTERNAL AND EXTERNAL STABILITY .
THE FEDERAL REPUBLIC OF GERMANY ENJOYS RELATIVELY FAVOURABLE CONDITIONS FOR A RETURN TO EXTERNAL AND INTERNAL ECONOMIC EQUILIBRIUM AND FOR ECONOMIC GROWTH , PERMITTING , AFTER SOME TIME , A REVERSAL OF THE FALLING TREND IN EMPLOYMENT . WHEREAS IN THE PAST THERE WAS A MARKED DETERIORATION IN BOTH THE EXTERNAL POSITION AND THE PUBLIC SECTOR ACCOUNTS , WITH THE DEFICITS OF BOTH GENERAL AND THE FEDERAL GOVERNMENT WELL ABOVE PLANNED LEVELS , SIGNIFICANT IMPROVEMENTS ARE NOW UNDER WAY . AS A CONSEQUENCE , THERE SHOULD BE GREATER ROOM FOR MANOEUVRE FROM NOW ON , AS THE BALANCE OF PAYMENTS CAN BE EXPECTED TO STRENGTHEN CONSIDERABLY , AND MAKE THE MAJOR CONTRIBUTION TO A RATE OF GROWTH OF 1 TO 2 % IN 1982 , WHICH IS FORESEEN AS INCREASING AS THE YEAR GOES ON . THERE DEVELOPMENTS SHOULD REINFORCE THE FOUNDATIONS ALREADY LAID FOR THE MEDIUM-TERM IMPROVEMENT OF ECONOMIC GROWTH AND EMPLOYMENT CONDITIONS .
ON THE EXTERNAL SIDE THE SIGNIFICANT DEPRECIATION OF THE DEUTSCHMARK TO MID-1981 HAS STRENGTHENED THE PRICE COMPETITIVENESS OF GERMAN INDUSTRY AND A STRONG EXPORT PERFORMANCE IN 1982 IS EXPECTED , THE PRINCIPAL FACTOR PULLING THE GERMAN ECONOMY OUT OF THE PRESENT RECESSION . THE RECENT STRENGTHENING OF THE DEUTSCHMARK , REFLECTED IN THE REALIGNMENT OF EMS CENTRAL RATES AND FIRMNESS AGAINST THE US DOLLAR WILL HELP TO REDUCE THE COST OF OIL AND OTHER IMPORTS ; AS A RESULT , INFLATIONARY PRESSURES ARE EXPECTED TO ABATE IN 1982 , WHEN THE INCREASE IN PRICES IS EXPECTED TO DROP TO APPROXIMATELY 5 % AND THE CURRENT BALANCE OF PAYMENTS TO IMPROVE VERY APPRECIABLY IN 1982 .
TO BOOST CONFIDENCE AND TO AVOID EXCESSIVE COMPETITION FOR SCARCE FUNDS IN THE DOMESTIC CAPITAL MARKETS , THE GOVERNMENT HAS TAKEN MEASURES TO REDUCE THE PUBLIC SECTOR DEFICIT .
THESE MEASURES ARE DESIGNED TO REDUCE THE NET BORROWING REQUIREMENT OF THE FEDERAL GOVERNMENT FOR 1982 TO DM 26.5 THOUSAND MILLION , COMPARED WITH A LIKELY OUT-TURN FOR 1981 OF APPROXIMATELY DM 37 THOUSAND MILLION . THIS IMPROVEMENT IN THE FEDERAL GOVERNMENT'S BORROWING REQUIREMENT IS MAINLY BROUGHT ABOUT BY CUTS IN EXPENDITURE , TOGETHER WITH CUTS IN TAX ALLOWANCES , AND BY TRANSFERS , TO THE FEDERAL BUDGET , OF PROFITS REALIZED BY THE BUNDESBANK . A MODEST INCREASE IN TAXATION IS ALSO PROPOSED . SUCH A BUDGET POLICY STANCE WILL MAKE IT POSSIBLE TO AVOID ADJUSTMENTS PROCEEDING TOO QUICKLY AND TO REMAIN IN ACCORDANCE WITH THE NEW MARGIN FOR MANOEUVRE FOR MONETARY POLICY