The economic experts at the Hans Böckler Foundation are not very optimistic about the new year. They demand a reform of the debt brake – and exceptions for particularly urgent investments.
According to the economic research institute IMK, the German economy is also facing a difficult year in 2024. The economic researchers expect the gross domestic product (GDP) to shrink by 0.3 percent. This was announced by the Institute for Macroeconomics and Business Cycle Research (IMK) of the trade union-affiliated Hans Böckler Foundation in Düsseldorf.
The experts see one of the main causes as the debt brake, which makes important investments in climate protection and infrastructure more difficult. “Structural change is already underway. It can strengthen our prosperity if we shape it well. It can endanger our prosperity if we do not support it appropriately and sufficiently,” said Sebastian Dullien, the scientific director of the IMK.
Debt brake reform called for
The authors of the study referred to the budget ruling of the Federal Constitutional Court. They are calling on politicians to regain lost economic policy scope – by reforming the debt brake. The introduction of a “Golden Rule” is therefore recommended. What this means is an exception rule that allows particularly important investments to be exempt from the debt brake.
The economic researchers believe that this is well justified because it would benefit current and future generations. However, they also admit that the chances of such a reform are not particularly good. According to Dullien, political majorities “will not be a given” in the foreseeable future.
Prediction lowered
In the fall, the IMK had forecast growth of 0.7 percent for 2024. Now the experts have lowered their prediction. At the end of 2024, GDP could return to the level of 2019, i.e. immediately before the start of the corona pandemic. Germany would have “experienced a lost half a decade economically” and lost important time to maintain prosperity and jobs on the way to a climate-friendly future, said Dullien. “2024 should be the year in which we emerge from the acute crisis.
According to the IMK, economic policy faces major challenges. If private households and companies continue to have a low propensity to buy and invest, there is a risk that the previously stable labor market could collapse and unemployment could rise significantly.
Source: Stern
