Germany's budget has been in surplus since 2014. Should the government spend more to ward off the threat of a recession?
celebrate such measly growth. But the country had spent so long fearing a slide into recession that even its third-quarter expansion of 0.1%, announced on November 14th, felt like a success. After the economy shrank by 0.2% in the second quarter, strong domestic demand and a surprisingly good export performance were enough to avoid Germany’s first technical recession since 2013.
Since March 2018 the finance ministry has been in the hands of Olaf Scholz, a centrist Social Democrat. Yet hopes for a much more expansive fiscal policy have been dashed. The black zero was written into the coalition deal between Angela Merkel’s Christian Democrats and Mr Scholz’s. Big government programmes, such as a recent package to reduce Germany’s carbon emissions, are designed to satisfy fiscal rules rather than the other way around.
One worry is that the slump will not be bad enough to trigger meaningful action. Another, says Jens Südekum, an economics professor at Heinrich-Heine-University Düsseldorf, is that a late, hastily implemented stimulus could cut against Germany’s long-term investment and restructuring needs. For example, subsidies or tax cuts could encourage car companies to keep plugging old technologies.
Some Germans have tired of foreign criticism. Public investment grew by 3.8% last year, they point out . Eckhardt Rehberg, who is leading thein discussions over next year’s budget, says capacity constraints and red tape make it hard to spend more without accelerating costs in construction. Local governments often fail to spend allocated funds as it is. In Germany’s tight labour market, companies cannot meet orders, and a chronically understaffed public-sector workforce struggles to manage them.
Such rows will not end soon. Meanwhile the outlook is uncertain. Germany’s export-heavy economy remains exposed to risks like a no-deal Brexit and the uncertainty around America’s trade spat with China. “German business expectations have fallen off a cliff,” according toMarkit, a research firm. The European Commission thinks German growth will outpace only Italy’s in 2020. Amid such worries, critics will continue to decry the German government’s tightfistedness.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Why the impeachment hearings are historic, but may not change minds: OpinionUnless Pres. Trump's wall of Republican support begins to crack, don’t expect the hearings to move public opinion very much, matthewjdowd writes.
Read more »
Data Is Great and All, But Here’s Why You Should Try Running By FeelQuantifying how hard your workouts feel can help you push past the psychological barriers that may be slowing you down.
Read more »
Garance Doré Walked Away From Social Media At The Height Of Her Success, But Why?Fashion Influencer Garance Doré Walked Away From It All At The Height Of Her Success, But Why?
Read more »
Sick and Tired: Why Fragrance is a Feminist IssueI’ve been on eight planes, 10 rideshare cars and two rental cars in the last three weeks—and in 50 percent of them, my head began to thump, the glad in the left side of my throat began to swell, my sinuses filled with mucus and I became hazy within minutes because someone was wearing perfume or cologne.
Read more »
Here's why the Tesla-BMW comparison doesn't make business senseBloomberg surveyed 5,000 Tesla Model 3 owners and concluded that BMW has something to worry about. But BMW has nothing to worry about.
Read more »
Why Bank of America's mortgage business is booming - Business InsiderBank of America's mortgage tech bets have helped save billions and spark a boom in home lending. here's how it's outpacing JPMorgan and Wells Fargo.
Read more »