Economic Experts Warn of Potential Recession in Germany This Year
Monika Schnitzer, the chair of the German Council of Economic Experts, has expressed concern that Germany may stay in recession this year due to “geopolitical disturbances”. According to her, the lack of growth makes it difficult to finance the challenges in defense and infrastructure and also leaves no room for reducing taxes.
Friedrich Merz, the winner of the recent election, had proposed tax cuts during his campaign to boost the economy. The economic experts warn, however, that tax cuts would not quickly be refinanced by the expected growth. “It takes time, it takes investments, it takes growth – and that does not happen overnight. And at the same time, it also needs public investments for that” Schnitzer said.
Schnitzer again advocated for a relaxation of the debt brake, not only for defense spending, but also to trigger state investments. This could become a growth driver, she said. In addition, she proposed launching a housing construction program. However, she also emphasized the need for necessary structural reforms in the pension and social insurance systems. “Something really needs to happen so that money can be saved” she said. She is skeptical, though, that a black-red government would be able to achieve this.