The economic outlook is bleak. The traffic light is trying to counteract this with a legislative package. But that will hardly be enough.
Anyone who still had hopes can bury them now at the latest. After the estimates of numerous economic researchers had already indicated it, it is now officially clear with the federal government’s economic forecast, which Economics Minister Robert Habeck (Greens) presented on Wednesday: Germany’s economy is falling behind.
The first year is followed by the second year with a mini-minus in gross domestic product. Despite lower inflation, our country will be slightly poorer in real terms in 2024, not richer – while the economy in almost all other industrialized nations is growing at some decent rates. (Read more about this here.)
That alone is bad enough news. The last time there were two years of recession in a row was in 2002 and 2003, when Germany went through tough structural change. And today it is even worse than back then: In fact, the German economy has not made any progress for almost five years, and gross domestic product is just half a percentage point above the level before the corona pandemic.
Which results in further bad news – one with political consequences, especially for the traffic light coalition: They will probably have to save more now and cannot hope for a warm windfall of money from bubbling tax revenues.
The fall forecast from the Ministry of Economic Affairs is a decisive factor for the tax estimate from the Ministry of Finance, which is expected at the end of the month. In the past decade it was regularly the case that even with only low growth rates, more tax money remained with the state, not only in nominal terms but also in real terms, because the inflation rate was close to zero percent. The result: The finance minister was able to keep the “black zero” – and at the same time waste additional money, for example on lavish voter gifts such as the “mother’s pension”, an idea from the then CSU boss Horst Seehofer.
According to Habeck’s latest figures, such a situation can hardly be assumed, on the contrary. The traffic light coalition’s current budget discussions are likely to become even more difficult due to the poor economic outlook.
The debt brake anchored in the Basic Law allows the state to borrow slightly more in the event that the economy does worse. However, a large part of this additional money is likely to be used to cover the foreseeable increase in expenditure on citizens’ benefit, because in a weak economy fewer people leave long-term unemployment behind them and the number of those in need tends to increase.
It is now all the more important that politicians do everything they can to get the economy going again. The legislative package entitled “Growth Initiative” is a good start, but only a start. It contains a lot of useful things that the SPD, Greens and FDP will hopefully not allow themselves to be talked over in the parliamentary deliberations.
But it is already clear that the 49 measures will hardly be enough to trigger a really strong economic policy impulse. Even the GDP increase of 0.5 percentage points calculated by experts, which is supposed to result from the “growth initiative”, is far too small given the current recession.
What Germany needs now is a new economic miracle. And this requires not only clear and convincing signals from politics that give citizens and companies planning security, but also tangible improvements to the location. For example, through a comprehensive renovation of the dilapidated infrastructure, for example by reducing corporate tax, which encourages investment in companies.
The question of how to finance all of this in light of empty coffers – whether through cuts in the welfare state, a private-public infrastructure fund or more debt – is becoming less relevant every day. What is important now is that something has to happen quickly. Otherwise Germany threatens to slide even further.