The growth prospects for the German economy are not rosy. The traffic light coalition offers little hope for improvement. They block each other and thus contribute to pessimism.
The traffic light is unanimous in its analysis of Germany’s economic situation. “Dramatic,” says Robert Habeck. “Embarrassing,” says Christian Lindner. The economics and finance ministers sound like they are not responsible for this. As much as both agree on the analysis, they also disagree about the way out of the crisis.
This can be seen in the annual economic report that Habeck is presenting today. Normally the presentation meets with a manageable level of interest. But in view of Germany’s chronic weak growth and the resulting need for action from a government coalition that is divided on key issues, things are now completely different. Last week, Habeck announced that the government was lowering its growth forecast for this year from 1.3 percent to just 0.2 percent.
Now the traffic light has formulated common ideas on how Germany’s weak growth should be overcome. But the announcements remain vague, according to the “Handelsblatt”. There are hardly any concrete measures in the text. Habeck, Lindner and Labor Minister Hubertus Heil had haggled so much over central formulations and prioritizations that the traffic light should consider it a success that the annual economic report is presented on time.
The coalition partners are far apart on fundamental issues. While the Greens want to breathe life into the economy by taking on more debt, the FDP categorically rejects this. It is relying on tax cuts without new debt, while the Greens are asking where their coalition partners want to cut the missing money in the budget.
“Significant” investment needs
According to “Handelsblatt”, against this background, a term was deleted from the annual economic report that is central to Habeck’s goal of restructuring the German economy towards climate neutrality: “transformative supply policy” – state subsidies for climate-friendly technologies, for example through tax discounts. According to his ideas, this could be financed through a debt-financed special fund. But that cannot be done with Lindner. Instead, he has in mind a “dynamization package” with “decisive steps to reduce bureaucracy.”
It goes on to say that another proposal from the Economics Minister failed because of the Social Democrat Heil. Habeck wanted to give low earners and pensioners more incentives to work. But the labor minister prevented that.
According to the report, the traffic light coalition members agree that there is a “significant” need for investment. Germany must “overcome a series of structural challenges with regard to its business location that have accumulated over the years.” Although the federal government warns of a permanent economic weakness in Germany and only sees growth of 0.5 percent per year in the medium term, the traffic light can only agree to make smaller adjustments.
The problems facing the German economy are huge. It is struggling with expensive energy, high tax burdens, a shortage of skilled workers and bureaucracy. The population is aging and young people in this country want to work less. But while business associations write fire letters to the federal government, the traffic lights continue to block each other and are thus becoming a reason for the country’s growth problems.
“The uncertainty in the economy must be attributed to the traffic lights,” said Ifo boss Clemens Fuest to the “Augsburger Allgemeine”. The measurable massive political uncertainty in the economy is as great in no industrialized country as it is here. “If companies don’t know exactly where politics is heading, they postpone large investments or invest abroad.” According to the economic researcher, the federal government has the necessary instruments to solve the problems. But: “The main obstacle is that this coalition is finding it very, very difficult to agree on a common course.”