Germany queried on budget deficit

Brussels has threatened action over budget deficits in the past

The EU is stepping up its pressure on Germany over its public finances, questioning Berlin on its plans to reduce its budget deficit.

Eurozone finance ministers have backed a European Commission plan to take disciplinary action against Germany unless it reins in its deficit.

Eurozone members must keep deficits below 3% of GDP but Germany has flouted this in each of the past four years.

Germany could face fines for failing to reduce public spending adequately.

At risk

Its deficit totalled 3.3% last year and, according to government forecasts, it will remain between 3.25% and 3.5% this year.

Germany has been given a 14 July deadline to explain what action it plans to take to reduce its deficit in 2007.

Berlin has said it is confident that it will bring the deficit down to 2.5% next year by implementing a range of tax-raising measures.

Angela Merkel's coalition government plans to raise the standard VAT rate from 16% to 19% and to reform corporate taxes.

Fellow offenders

Spending cuts of up to 80bn euros are also planned.

Germany is one of a number of countries to have regularly flouted the eurozone's budget deficit rules - designed the underpin the single European currency - over the past five years.

Greece is facing a substantial fine if it breaches the 3% ceiling this year.

However, the Greek government said on Tuesday that it expected to conform with the rules after new tax-evasion controls boosted revenues.