Germany

A decade after reunification sent the national debt and unemployment soaring, Germany is finally getting its economic house in order. Finance Minister Mr Hans Eichel has demonstrated a steady hand on the country's purse-strings and is focused on balancing the budget by 2006.

Half-way through its term in office, Germany's centre-left government has delivered long-overdue structural reforms, the most important of which was last July's sweeping tax reform.

The top rate of income tax will fall in stages to 42 per cent in 2005 from 51 per cent today while the bottom rate of tax will drop to 15 per cent from 22.9 per cent today. Corporation tax will fall to 25 per cent from its present level of 40 per cent. The tax package will cost DM57 billion (€28.5 billion) but the coffers are overflowing with the DM100 billion (€50 billion) proceeds of the third-generation mobile phone licence auction as well as DM6 billion (€3 billion) from the sale of a 25 per cent stake in Deutsche Post.

At the moment, the government is battling to get its pension reforms through parliament. The proposed reform will cut benefits but introduce private pension schemes with government back-up of DM20 billion (€10 billion).

The world's third-largest economy is on track to achieve 3 per cent growth this year. While still behind the euro-zone average, it would be twice the 1999 rate.