The German economy is weakening

The economy in Germany has cooled noticeably. Should economic growth be spurred on by spending billions – and should new debt be made for it? The calls are getting louder. Chancellor Angela Merkel and Finance Minister Olaf Scholz have so far made it clear that they want to stick to their course of “black zero” – a policy without new debt.

In the first half of the year, the German tax authorities achieved a surplus of 45.3 billion euros despite the economic downturn. This awakens desires. “Germany is one foot in recession and Olaf Scholz swims in the money,” says FDP faction vice Christian Dürr. He calls for tax relief “so that companies can take new confidence and invest in the future.”

Long phase of recovery

Left-wing vice-president Fabio De Masi demands that the federal government take advantage of the historically low interest rates and “make urgently needed massive investments.” Investment in public infrastructure would encourage private investment and would secure thousands of jobs.

The recession year 2009 was followed by a long phase of recovery in Germany with booming tax revenues. Since 2014, the federal budget has been achieving a “black zero” every year. But due to the weaker economy, tax revenues are not so strong as the tax estimate showed in May. Scholz had to refinish the Budget 2020 and tighten his belt.

And the prospects are not rosier: The hope for an economic recovery in the second half of the year is dwindling. In the second quarter, gross domestic product (GDP) shrank by 0.1 percent compared to the beginning of the year, weighed down by international trade conflicts and the slowdown in the global economy. In addition, there is Brexit. Industry President Dieter Kempf feared that full-year growth could fall to zero should the British exit the EU at the end of October in a chaos Brexit without agreements. So far, the industry association BDI expects economic growth of no more than 0.5 percent this year.