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The fastest economic growth this decade in 2006, Merkel’s first full year in power, and in 2007 helped her administration to narrow the deficit. The economy expanded 2.9 percent in 2006 and 2.5 percent last year, helping cut cumulative public sector deficit to 37 billion euros and 400 million euros respectively.

Budget surpluses ran last year by Germany’s states and municipalities outweighed a federal deficit to create the country’s first balanced budget since 1969. European Union rules on taming budget deficits apply to the composite budget.

Fiscal policy got a lot tighter than I had realized. No wonder it’s coming down so hard.


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