The head of the Munich Ifo Institute has sharply criticized the current German federal government regarding its policy work. Speaking to “Stern” he stated that the “key mistake is that the coalition has failed to develop a clear concept of where it wants to go”. He noted that the coalition agreement merely contains a “sammlung of individual measures” that are being implemented piece by piece, concluding that “there is nothing more”. According to the Ifo director, the federal government urgently needs a credible overall strategy to make Germany competitive once again in the coming years-a plan powerful enough to convince and motivate the public. He added that the current approach of the black-red coalition has instead led to a sense of uncertainty among the population.
Regarding the decline in citizens’ consumption spending, the Ifo chief holds the federal government partially accountable. He explained that many individuals are worried about their economic futures, and this concern is compounded by short-term uncertainty caused by policy fluctuations, such as the back-and-forth regarding the relief premium. For citizens who were counting on this support, the changing policy has been a negative development that calls into question the competence of the crisis management. Fuest stressed that in the current geopolitical and economic crisis, people expect well-thought-out policies.
Finally, looking at the rising levels of public expenditure, Fuest emphasized the need for a cap on the state share. He argued that a statutory regulation is urgently necessary to limit the state quota, perhaps below 50 percent. To achieve this goal, the federal government, the states, and municipalities must consistently cut spending, particularly in subsidies. As a preventative measure, he proposed gradually halving these subsidies over the next five years. Such a multi-year approach, he concluded, would generate both predictability and confidence.