Bundesbank President Joachim Nagel has called for a reform of the debt brake. “The next German government, whoever forms it, should reform the debt brake” Nagel told the “Spiegel” on the sidelines of the World Economic Forum in Davos, Switzerland. “That would be our advice.”
Germany, Nagel said, has indeed some room for maneuver, given its relatively low debt-to-GDP ratio. “We should not close our eyes to the fact that we will need more money for the tasks of the future.”
Nagel also advocates for a part of the military expenditures to be financed European-wide, rather than directly through national budgets. “That would be appropriate in the face of the threat situation and a benefit for all countries.” A similar view was expressed by the former ECB President Mario Draghi in his 2024 published report on the future of the European competitiveness.
As for the core business of the central banks, the fight against inflation, Nagel is optimistic that the hardest times are behind us. “I am optimistic that the inflation in the eurozone will be back at our target of 2.0 percent by the middle of the year, as the wage dynamics are normalizing and as the economic development in Europe continues to be subdued” he said.