The German government could take over almost € 2 EURO-EURO debts in the next decade without damage to the risk of growth, as can be seen from a survey of the financial times of the Eurozone economists, which supports the likely Chancellor Friedrich Merz from Fiscal Bazal.
A survey of economists carried out last week was estimated that the largest economy in Europe could increase its budgetary impact from its current level from 63 percent of GDP to 86 percent of GDP in the next decade without negative effects. The answers of the 28 economists imply fiscal space of 1.9 tn.
“Germany has a great financial capacity,” said Marcello Messori, professor at the European University Institute in Florence and added that the space should be used to create more debts to bring the German and the broader European economy towards “high-tech sectors and an effective green transition”.
The results come to Merz, the head of the middle-right-Christ democrats, and his likely coalition partner, the Social Democrats, plans to increase the creaking infrastructure of the country on Tuesday and the increase in defense spending.
Economists await the urgently needed fiscal bazooka, which follows for more than five years of economic stagnation, over the next decade leads to additional € 1 year.
“The crucial point,” said Jesper Rangvid, professor at Copenhagen Business School, who estimated that the manageable level of debt is 80 percent “or maybe 90 percent” that Germany “had space for responsibilities” in order to pay the improvements in the reparation and the infrastructure.
“Critical infrastructure, such as the notoriously inefficient rail system and general its infrastructure, and digital infrastructure, must be improved,” he said.
The FT calculations of the 1.9 -year -old US dollar in the household area assume that the German nominal GDP will increase by 2 percent a year by 2035. This estimate is likely to be conservative, since it does not take into account a real GDP growth if the inflation matches the 2 -protz target of the European Central Bank.
Many participants emphasized that the additional borrowing had to be combined with a structural reform in order to increase the country’s productive capacity.
“The money alone will not solve the challenges,” said Ulrich Kater, the chief economist of the DEKA Bank based in Frankfurt.
Willem Buiter, former chief economist from Citi and consultant at Maverecon, described the German economy as “over -regulated” as a “grotesque”.
On Saturday, the likely coalition partners outlined further political details that come together with the calls of the economists.
Instead of cutting bureaucracy and unleashing a significant reform, the probable coalition instead promised new state advantages-in one person-a higher pension for non-working mothers, VAT for restaurants and a reintroduction of fuel subsidies for farmers.
Bert Flossbach, co -founder of the German asset manager Flossbach von Storch, said before the announcement on Saturday that the flexibility of the new government to spend a lot to defense could “create more space to increase social consumption and the inflation of the welfare state.
Lorenzo Codogno, founder and chief economist of the LC macarovers, said that Germany’s “real problem” is his model, which has existed in the past 20 years and has been dominated by “demanding but old industries”. Germany also needed “leading, innovative companies,” he said.
“German industries are in a middle -class trap” and the country needed to “modernize” its production, said Anti Alaja, economist at the Finnish Center for New Economic Analysis.
Stefan Hofrichter, an economist at Allianz Global Investors, accused the suffocating bureaucracy and the tax regime of the country and said that the economy was towed by “too rigid bureaucracy” and “too high corporate taxes”, both of which “contributed to private sub -investments”.
Jörg Krämer, the chief economist of Commerzbank, asked Merz to choose the influence of the state on the economy and to trust “the citizens and companies”, instead according to “better terms and conditions”.
The results were based on 28 quantitative answers to the question of whether Germany could increase its federal debt without effects on growth.
A widespread study by Kenneth Rogoff and Carmen Reinhart from 2010 suggested that debt of more than 90 percent of GDP growth harms this conclusion that later examinations questioned this conclusion.
“The economic literature does not provide a clear answer to the appropriate public debts,” said Isabelle Mateos Y Lago, group boss at BNP Paribas and added that the guilty dynamics that were controlled by the nominal growth and credit costs are more important.
All 41 economists who reacted to a question of the strict debt brake in Germany, which blocked additional expenses of 0.35 percent of GDP, said that the credit rule that has been in effect since 2009 was to be released.
More than a quarter – or 29 percent of the respondents – stated that it should be fully abolished, which should be 41 percent or revised to offer “much more flexibility”. The remaining economists supported a moderate reform to introduce “a little more flexibility”. Nobody asked the rule to remain unchanged or harden.
“(The) German obsession with fiscal cleverness is overdon and reforms are overdue,” said Martin Moryson, Global Head of Economics at German Asset Manager DWS and added that the incoming government “obviously” understood the “size of the task” and is the challenge. “
However, the Green Party’s legislators said on Sunday that in their current form they made Merz’s plans to create Fiscal Space by moving defense expenses over 1 percent of GDP outside the debt brake.
Your opposition could thwart the plans, have to adopt the changes to the Germany’s constitution and a two -thirds majority in the upper house of the parliament, the Federal Council.
Data visualization of Oliver Roeder in London
