Federal Finance Minister: Will Lindner achieve the economic turnaround?

Federal Finance Minister: Will Lindner achieve the economic turnaround?

Flop in terms of economic growth, top in terms of debt ratio. Germany is an exception at the IMF spring meeting. Finance Minister Lindner takes the numbers home as an argumentative aid.

Christian Lindner actually doesn’t like what the International Monetary Fund is predicting for the development of the German economy: Germany is at the bottom of its class in terms of growth among the leading Western industrial nations. “Just a hangover,” reassured the German finance minister these days at the IMF spring meeting in Washington. “Just a hangover.”

Lindner’s mood is not as bad as the numbers suggest. Because you could also understand it as an argumentative aid for what the FDP leader has been propagating for weeks: Germany needs an economic turnaround.

“We feel that we are in line with the recommendations of the International Monetary Fund,” says Lindner. The experts recommend, among other things, reforms in the labor market. They recommend that many states reduce deficits and consolidate their budgets. But the IMF doesn’t necessarily have Germany in mind.

Because as bad as the Federal Republic is in terms of economic growth, it is a nerd when it comes to debt levels. Other large countries – the USA, China – have more growth, but also debt ratios of more than 100 percent of economic output. The German rate is 64 percent and the trend is falling. The reaction of the IMF in Washington sounds similar to the pleas of Lindner’s coalition partners SPD and Greens at home: Germany can afford to take on more debt in order to stimulate the economy.

Lindner relies on more working hours instead of debt

This is out of the question for the party leader. In Germany there is not a lack of public money, but rather a lack of productivity, he analyzes. Bundesbank boss Joachim Nagel agrees with the finance minister: He could only imagine greater leeway in the debt brake if the German debt ratio fell below the Maastricht target of 60 percent.

Lindner imagines something different when he talks about an “economic turnaround”: He is of the opinion that there is too little work in Germany. The problem of the German economy is a deficit in the number of hours worked per year. “In Italy, France and elsewhere there is significantly more work done than here.” This is due to regulations on reducing working hours, demographics and also unwanted part-time work due to a lack of childcare options.

Among other things, Lindner proposed making a limited number of overtime hours for full-time employees tax-free. This is supposed to make you want to work overtime. Foreign skilled workers could be attracted with a tax discount. Lindner reportedly presented these proposals to Chancellor Olaf Scholz (SPD) and Economics Minister Robert Habeck (Greens). The Finance Minister also sees a need for reform when it comes to pensions.

It is not known how the chancellor and vice-chancellor reacted. On the other hand, Lindner believes that Habeck’s earlier push for a debt-financed special fund would mean more subsidies for the benefit of the economy. In the domestic political debate, many would like to see a subsidy program similar to the IRA (Inflation Reduction Act) in the USA, he says in Washington. But these measures would not have achieved exactly that: reducing inflation. “On the contrary: while accepting high public deficits, prices were actually fueled by government subsidies.”

Decision on “economic turnaround” planned by early July

Many of the measures he proposed for an “economic turnaround,” however, did not cost any money, but instead saved money in the state budget and in the social security systems, argues Lindner. “When people work or work more, they end up paying higher taxes and social security contributions and receiving fewer social transfers.” The billions saved could be used to finance tax relief for the economy. Lindner envisions better depreciation options and a reduction in the solidarity surcharge that the top ten percent of taxpayers, including many companies, currently pay.

The “economic turnaround” should also be in place by July 3rd at the latest, when the budget for the coming year is supposed to be in the cabinet. It is doubtful whether the ideas that have been floated so far will actually provide a liberation. This would be particularly crucial for the FDP shortly before a federal election. Because no party in the traffic light coalition drives home the problems of the economy as much as it does – paradoxically, since the economics minister is from the Greens, who are not feeling much of the negative mood.

Source: Stern

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