Germany, in recession in 2023, “is not a sick man”, but simply “a tired man” who “needs coffee” in the form of structural reforms to revive growth, its Minister of Foreign Affairs and Finance said on Friday in Davos. Christian Lindner. Many observers have recently described the euro zone’s largest economy as “Europe’s sick man”, echoing an expression used in the late 1990s following the backlash to reunification.
The gross domestic product (GDP) of Europe’s largest economy fell 0.3% in 2023, after an increase of 1.8% in 2022, according to official data. “I know some people think Germany is a sick man,” said Christian Lindner, speaking on a panel at the World Economic Forum meeting, which ends Friday in the Swiss Alps.
“The weak growth prospects are a wake-up call and we are going to have a good coffee, that is, make structural reforms, and then continue to succeed economically,” he explained.
Budget cuts hurt growth
The growth of German economic activity was significantly lower last year than that observed on average in the EU, which would have been limited to 0.6% in 2023, according to the latest forecasts of the European Commission, with stronger increases in France, Spain and Italy. . It is also behind other large industrial countries, such as the United States or the United Kingdom, but a recovery is expected to begin in 2024. The government expects growth of 1.3% in 2024, the International Monetary Fund (IMF) expects a increase of 0.9%.
Now “we have to do our homework,” he said. “We had to solve the issue of debt and deficit” but “we did it.” A forceful ruling by the Constitutional Court canceled 60 billion euros of investment credits in November in the name of constitutional budgetary rules. This decision forced Olaf Scholz’s government to cut certain expenses. According to the IFO economic institute, these budget cuts should cost Germany 0.2 growth points in the coming months.
The country also faces structural challenges, such as a lack of labor, an aging population and a lack of investment that could continue to hinder growth. At a more international level, Christian Lindner estimated that “in Europe we must prepare for the possibility of a second term of Donald Trump by promoting our competitiveness. Doing our homework is the best preparation for a possible second term of Donald Trump,” he stated. the said.
Source: BFM TV
