World
February 20, 2025 10:57
berlin, germany - German elections amidst economic stagnation and calls for policy changes to address high costs and low competitiveness.
German Elections and Economic Challenges
As the German economy continues to stagnate, the upcoming elections are crucial for steering the country towards economic recovery and growth. Professor Veronika Grimm emphasizes the need for significant policy changes to address the current economic challenges.
Leadership and Economic Strategies
Multi-millionaire Friedrich Merz, the leader of the conservatives, is poised to become the Chancellor in Berlin, based on recent polls. Merz advocates for tax cuts, streamlining regulations, and boosting defense spending. He also aims to reform welfare benefits, including those received by refugees.
Professor Veronica Grimm highlights the high labor costs, social security contributions, and stringent job protection laws in Germany, which hamper competitiveness. The country's extensive welfare system and pension expenditures pose significant budgetary burdens, affecting economic growth.
Economic Performance and Challenges
Germany's economic growth remains at 2019 levels, signaling a slowdown in production and manufacturing orders. The absence of a balanced budget for the current year adds to financial uncertainties and potential political instability.
Recent job cuts at companies like Continental, Commerzbank, and Volkswagen underscore the economic challenges facing the country. Efforts to retain workers during the crisis, such as reduced working hours, have impacted productivity negatively.
Energy Costs and Regulations
The transition away from nuclear power and reliance on expensive energy sources have inflated energy costs in Germany. Economist Grimm stresses the need for increased investments in energy infrastructure to address climate protection mandates and reduce CO2 emissions.
Fiscal Policies and Debt Restraints
Debates around Germany's constitutional debt limits, known as Schuldenbremse, highlight the need for responsible fiscal policies. While some criticize the rigid 0.35% GDP deficit cap, Grimm warns against abandoning debt restraints to prevent escalating interest rates.
The upcoming elections will determine Germany's economic direction and the measures to revitalize growth amidst challenging economic conditions.