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Tugboat in the port of Hamburg: a bad mood is an “independent burden”
Photo: Marcus Brandt/dpa
In view of the sluggish economy in Germany, leading economic experts have called on the federal government to take decisive action. The head of the German Economic Institute (IW), Michael Hüther, told the “Rheinische Post” that the federal and state governments would have to provide the German economy with significantly greater relief through the planned Growth Opportunities Act than was previously foreseeable.
Politicians “should focus on investments, both in the short and medium term,” said Hüther. “The Growth Opportunities Act actually contains all the instruments aimed at this, you just have to be bolder,” for example through immediate depreciation for all movable assets and a “technology-neutral investment bonus.” However, it is becoming apparent in the mediation committee of the Bundestag and Bundesrat that the originally planned relief will be more than halved to a good three billion euros next week.
The director of the employer-related institute attributed the falling economic performance partly to political uncertainty. The bad mood is an “independent burden,” said Hüther.
Fratscher calls for the debt brake to be suspended
The head of the German Institute for Economic Research (DIW), Marcel Fratzscher, called on the federal government to suspend the debt brake. “In addition to high interest rates, the inadequate financial policy and obsession with the debt brake are a strong brake on the German economy again this year,” he told the “Rheinische Post”. In economically difficult times, the German state must provide greater relief to citizens and companies and invest significantly more itself.
In addition, Germany will have to raise more money for Ukraine, emphasized Fratzscher. "That's why now is the time to be honest and suspend the debt brake for 2024 so as not to risk lasting damage to the German economy."
At the same time, the DIW President warned against pessimism. "Germany's ongoing economic weakness is not surprising and is no reason to panic," he said. It is "primarily the result of the war in Ukraine, because the high costs of energy and food are slowing down private consumption by people with middle and low incomes and also the exports and investments of many industrial companies."
»Unspeakable black painting«
“The unspeakable pessimism of some business bosses and politicians is the biggest domestic brake on the German economy this year,” criticized Fratzscher. After all, the economy is “80 percent psychology and the shaken trust of citizens and companies in Germany’s future viability is slowing down private consumption and investments.”
Apart from that, the geopolitical uncertainty caused by the wars in Ukraine and the Gaza Strip as well as China's economic weakness are hitting German exports hard, said Fratzscher. "The talk of Germany as the sick man of Europe is misplaced, because Germany is suffering more than almost all other industrialized countries from the war in Ukraine and global factors, as the German economy is much more dependent on exports and fossil fuels."
Federal Economics Minister Robert Habeck (Greens) announced on Wednesday that he would lower his house's economic forecast for 2024 from 1.3 to 0.2 percent growth.
mic/AFP