To boost the German economy, US economist Kenneth Rogoff advocates for a relaxation of the debt brake. “I think it’s too strict and Germany needs more fiscal policy room” Rogoff told the Spiegel.
The debt brake has helped keep the German state debt low. Now, however, higher investments in infrastructure and defense are necessary, said the economist, who is otherwise known for criticizing high government debt.
“Germany is struggling with a dilapidated infrastructure, high energy prices, and growing competition for the auto industry” Rogoff said. “Now, looming US tariffs and a trade war are added to the mix.” In the face of numerous challenges, not only higher investments but also reforms are needed, Rogoff believes: “I firmly believe in a strong comeback of the German economy, but it will take years.”
The economist also warns of dangers to the stability of the financial system due to the boom in cryptocurrencies like Bitcoin: “Already, cryptocurrencies and the traditional financial system are closely intertwined” Rogoff said. “If this development continues, the cryptocurrency branch will become a systemic risk for the US financial system and thus for the US economy.” The price of the oldest and largest cryptocurrency had reached new record highs after Donald Trump’s election victory.