As the upswing broadens, real GDP is projected to grow slightly above potential, 1.75% (adjusted for working days) in both 2006 and 2007. The general government deficit is likely to total 3.9% of GDP in 2005, and remain high in 2006, but then fall to 2.6% in 2007, largely on account of an increase in the value added tax rate.For economic performance to be raised in a durable way, the new government has to go further in reforming labour and product markets within a coherent framework. Fiscal consolidation needs to be linked to more fundamental spending reform, requiring, inter alia, the untangling of responsibilities across different levels of government, more determined reductions in both subsidies and tax expenditures and continued reform of the social security system.

Population (000s), 2004	82 491
Area (000 sq km)	357
Currency	Euro
GDP (Billion USD), 2004	2 740.7
Life expectancy at birth (Women, Men), 2003	81.3, 75.5
Total labour force (000s), 2004	40 033
Government type	Federal Republic

Indicators	% change unless otherwise indicated
	2005	2006	2007
GDP growth	1.1	1.8	1.7
Household savings ratio	10.6	10.6	10.5
Consumer price index	2.0	1.7	1.3
Short-term interest rate (%)	2.2	2.2	2.9
Unemployment rate (%)	9.3	9.1	8.7
General government financial balance (% GDP)	-3.9	-3.6	-2.6
Current account balance (% GDP)	4.1	4.6	5.2

Source: OECD© OECD Observer, No. 252/253, November 2005