Economist Monika Schnitzer attributes a share of responsibility to the failed grand coalition for the ongoing recession.
“The grand coalition has with its constant bickering unsettled the people and the companies – and thereby contributed to the downturn of the economy” said the chair of the Council of Economic Advisers to the Funke Media Group newspapers. “But one can’t solely attribute the recession to the grand coalition.” Industrial production had already begun to decline before 2021.
Schnitzer warned of further loss of well-being if a grand coalition emerges after the federal election. The next government must primarily reduce uncertainty and pull in the same direction, she said. “But that won’t be so easy, especially if it leads to a grand coalition. The Union and the SPD come from different worlds that won’t easily come together. There’s a risk of reform stagnation – and further loss of well-being.”
The economist criticized “election gifts” in the parties’ programs. For example, lowering the value-added tax in the hospitality industry would not bring anything to Germany. Schnitzer warned against the expectation that tax cuts would finance economic growth through savings. This is “completely unrealistic in the short term” she said. “It’s possible that we’ll only have half a percent or one percent growth for years to come.” The reference to potential savings in the citizen’s allowance did not impress her either. “From a reform, only small amounts would emerge, with which one cannot finance significant tax relief.”
Therefore, the next government will not be able to avoid reforming the debt brake and changing the constitution. “That’s also okay” said Schnitzer, and referred to a reform proposal by the economists, which would create an additional scope of nearly 30 billion euros a year if the debt-to-GDP ratio were at 60%. “What’s essential in a debt brake reform is the statutory regulation that the additional money is exclusively used for forward-looking investments – defense, infrastructure, education – and not for a pension package.