Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Merkel Rejects Growing Calls to Fend Off Slowdown With More Spending

Published 09/11/2019, 06:25 AM
Updated 09/11/2019, 11:00 AM
© Reuters.  Merkel Rejects Growing Calls to Fend Off Slowdown With More Spending

© Reuters. Merkel Rejects Growing Calls to Fend Off Slowdown With More Spending

(Bloomberg) -- Chancellor Angela Merkel rejected growing calls at home and abroad to fend off an economic slowdown with increased spending, saying that the problem wasn’t a shortage of money for investment.

Merkel told parliament on the second day of its budget debate that there were sufficient investment projects in the pipeline that needed to be fast-tracked. Her speech comes after Finance Minister Olaf Scholz on Tuesday said Germany would stick to a balanced budget but was ready to act in moments of a crisis.

"With the investments, and the finance minister touched on that yesterday, it’s currently not a lack of money," Merkel said. "We have hundreds of thousands of apartments that could be built, we have roads, we have digital infrastructure. So, first we need to make sure the money is being spent."

Germany has come under growing pressure to boost spending as it faces the prospect of a recession in the third quarter. The International Monetary Fund renewed its call for action this week, saying Germany shouldn’t wait for an economic shock before boosting public investment

The economy shrank 0.1% between April and June and many indicators are pointing to a further contraction in the third quarter.

The argument in favor of debt-financed stimulus is that Germany’s debt burden has come down dramatically in recent years and that negative interest rates are likely to remain low for a considerable time. Even within the finance ministry, the beacon of German fiscal discipline, the mindset is beginning to change.

Europe’s largest economy has a “broad range” of long-term issues including infrastructure, digitization and the participation of women in the workforce that it could spend money on, Poul Thomsen, the head of the IMF’s European department, said in an interview in Brussels.

“Germany is not constrained by debt levels from pursuing such good fiscal, structural measures,” he said.

Marcel Fratzscher, president of Germany’s DIW economic research institute, also weighed in on Wednesday, favoring a long-term government investment program.

“Instead of complaining about low interest rates, politicians should understand this as an opportunity to invest wisely in the future," Fratscher said. “We need a shift in fiscal priorities away from public consumption toward more government investment."

The 2020 budget was approved in cabinet in June and faces a vote in parliament in November.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.