The president of the German central bank called on Wednesday to ease the “debt brake” to revive the country’s economy, joining the camp of increasingly numerous supporters of a reform of budgetary rules.
Giving more budgetary flexibility to the State to regain growth is a “very interesting approach”judged Joachim Nagel in an interview with the British newspaper Financial Times.
“We can consider making a distinction between consumption spending and investments, in order to have more room for maneuver” to modernize Germany’s aging infrastructure, said the head of the Bundesbank.
Established in 2009 by the conservatives of the CDU, the “debt brake” Germany prohibits the government from borrowing more than 0.35% of its GDP each year.
Supported by the liberals and criticized by the center left, this constitutional measure partly led to the implosion of the government coalition in November.
Now, even the CDU, like many economists, is in favor of a moderate reform of this instrument, which would require the support of two-thirds of the votes in Parliament.
“Past experience shows that when Germany feels pain, it changes”assure Joachim Nagel.
Weighed down by the crisis in its industry, Germany is heading towards a second consecutive year of recession, with a decline in gross domestic product expected to 0.2% in 2024, according to government forecasts.
The increases in customs duties promised by Donald Trump for his return to the White House could cost Germany 1% of its gross domestic product, Mr. Nagel warned in November.
And the outlook for 2025 is getting darker: the OECD now expects GDP growth of 0.7%, a downward revision of 0.3 points compared to September estimates.
THE « Sages » Germans, advice of five economists, suggest a “moderate reform” debt brake to boost public investment in transport, education and defense.
In detail, they recommend raising the limit of the annual public deficit to 0.5% if the debt ratio remains below 90% of GDP, or even 1% in the event of debt below 60% of GDP.
With a debt equivalent to 63% of its GDP in 2024, Germany is a good student in the euro zone.