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- Germany: Will politicians heed the call for fiscal stimulus? – Rabobank
Germany: Will politicians heed the call for fiscal stimulus? – Rabobank
Analysts at Rabobank note that Germany has become increasingly dependent on exports for its economic performance, supported by an initially strong competitive position and robust demand for capital goods.
- “The negative consequences of this export-led model are now starting to materialize.
- We believe there is a colossal need for government and private sector investment in infrastructure, climate-related innovation and Germany’s poor digital infrastructure.
- Germany is also feeling the impact of an aging population more than other eurozone member states. The negative contribution of labor to future economic growth could be as high as -0.8ppt annually.
- We argue that adopting an investment fund focused on R&D, capital formation and education could lead to significantly higher TFP growth.
- We look at two investment scenarios (€150bn and €450bn) that could lift the country’s potential growth rate.
- While the government is unlikely to abandon its strict budgetary rules for the €450bn package, we believe a €150bn investment package is possible under the constitution - although it will still take some political will to implement it.”
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