Economic expert Veronika Grimm, a member of the German Council of Economic Experts, expressed her concerns in an interview with the German magazine Focus about the debt plans of the next federal government, which are camouflaged under the term “special assets”. The Zentrum für Europäische Wirtschaftsforschung (ZEW) also shows little enthusiasm.
Grimm, a professor at the Technical University of Nuremberg, initially stated in the interview: “This is a gigantic uncertainty package. Instead of sending a strong signal in the direction of Russia, but also the US, the new federal government is likely to lead us into a trap. The debts are to be used in large part not for future-oriented expenditures, but to create space in the core budget to anchor or maintain further social expenditures and benefits.”
CDU leader Merz recently discovered the argument of global events to justify his planned debt plans. Grimm comments on this in the interview: “This is completely nonsensical, considering that far-reaching decisions are justified by a dramatically intensifying global situation. The turning point has thus been cancelled, after it was used to justify the desired debt. One creates a situation that will become increasingly hopeless for future federal governments.”
Grimm recognizes the resulting danger that it will become increasingly difficult for politics to implement effective reforms. It would become “impossible on a democratic path at some point”. The debt crisis, not just in Germany, would also put EU states in more danger: “An open flank for security is the fact that the enormous debts are likely to lead to a debt crisis in the European Union. Interest rates on government bonds will rise. This will particularly make it more difficult for highly indebted states in the Eurozone to finance additional defense expenditures.”
The question thus arises, “how long will it take before something goes wrong” and further: “Everything will become increasingly unpleasant, the less growth is triggered. And sustainable growth is not in sight, rather a short-lived fire of straw through the higher expenditures.”
The plans of the potential grand coalition would show in many areas of the reform need that “the new money is meant to cover up the problems, for example in housing”. Further dangers of financial chaos would be visible in the topics of “energy, climate, pension, digitalization, health and building”.
Regarding the plans of CDU/CSU and SPD to “put 500 billion euros into infrastructure alone”, the economist critically summarizes the plans from Berlin: “One creates space in the core budget to expand or maintain the benefits (..) I consider it a naive idea to first create credit space to enable then the planning and implementation of reforms. Who wants to make themselves unpopular for reforms, when others offer to simply use subsidies to solve the issues? That’s what the debt brake was for, to strengthen the reform drive. It is now history.”
Friedrich Heinemann, a representative of the ZEW, criticizes the planned package of measures, stating that “the planned end of the debt brake by the two partners will again widely open the sluices for senseless subsidies and client politics”. According to Heinemann, the agreement lacks everything that Germany urgently needs: a higher retirement age, an expansion of the working week, more personal responsibility in the case of illness and care, flexibility in the labor market and a consistent reduction of subsidies.
The ZEW member also criticizes the planned increase in the minimum wage to 15 euros, stating that it will lead to a significant cost shift for low-skilled workers in structurally weak regions – and that in a strongly cooling labor market.
The German Farmers’ Association supports this criticism. The fruit, vegetable and wine production would then be “no longer competitive in Germany”, said the association’s president, Joachim Rukwied. He welcomed the announced return to the subsidization of agricultural diesel.