analysis
Germany’s economy remains in crisis mode. The federal government wants to improve conditions for companies, but is discussing the right way forward. How do experts rate the proposals?
It’s such a thing with unity in the traffic light government. In the most recent case, Finance Minister Christian Lindner from the FDP and the Green Economics Minister Robert Habeck at least have a common goal. Companies in Germany should be relieved and the business location should be strengthened. But the traffic light factions argue about how this can be achieved.
Habeck had recently spoken out in favor of a special fund worth billions to enable tax credits and depreciation. Finance Minister Lindner rejects this idea. A special fund means new debts, said the FDP leader. Lindner has suggested abolishing the solidarity surcharge for companies. This in turn is criticized by Green Party leader Ricarda Lang. She has not yet heard any proposal for counter-financing.
Two different philosophies
In the debate, Stefan Kooths, head of the economic cycle at the Kiel Institute for the World Economy (IfW), sees two different philosophies. Economics Minister Habeck is not interested in reducing taxes for companies in general: “But rather in combining this with steering the economy. In other words, formulating exactly which specific investments, for example, depreciation relief should now be granted.”
According to Kooths, there is a different philosophy behind the proposal to abolish the solidarity surcharge tagesschau.de. There is no direct intervention here, but rather the overall tax burden for companies is reduced.
The head of the Munich ifo Institute, Clemens Fuest, criticizes the federal government’s lack of an economic policy strategy. “There is a blatant disagreement between the economics and finance ministries and as a result there is extreme uncertainty,” said Fuest at a discussion organized by the OECD, the industrialized nations organization.
Is it possible without new debt?
When it comes to the question of new debt, opinions among economists are also divided. Carsten Brzeski, chief economist at ING Bank, is skeptical as to whether strengthening the economy will work without a debt-financed special fund or a sovereign wealth fund: “If I have government spending that amounts to almost fifty percent of gross domestic product, then in theory I am of course right when I say , I could snap something here and there.” But the political reality is different, said Brzeski in an interview tagesschau.de. The simpler solution to show any ability to act is to take on new debt.
Stefan Kooths from IfW sees it differently. He speaks out against financing relief for companies through loans. There is already a conflict over the distribution of money: “We are now entering a phase of demographic change, and unfortunately this means that the distribution conflicts in Germany will intensify.” Taking on new debt only pushes the conflict into the future, says Kooths.
“Growth Opportunities Act” hangs tight
In the dispute over the direction between Lindner and Habeck, Chancellor Olaf Scholz has now also intervened. Scholz referred to the “Growth Opportunities Act”: a package that provides tax incentives for investments in climate-friendly technologies. “I hope that this very concrete and very practical project, which is intended to make it easier for companies to invest, will become something even with the approval of the states,” said Scholz.
However, the project is currently pending in the mediation committee of the Bundestag and Bundesrat. The countries criticize that a large part of the costs remain with them. How quickly the law will actually be passed remains an open question. The mediation committee will meet again on February 21st. Economics Minister Habeck fears that the federal states could limit the planned relief volume of around eight billion euros: “In the end there will probably be three billion, so it will be even smaller, almost homeopathic,” warned Habeck in the ARD-Broadcast Caren Miosga.
Germany is falling behind internationally
An economic and political storm is now raging in Berlin – which is connected to the fact that there is a lull elsewhere. The economy is still in crisis. In January, according to surveys by the Ifo Institute, the mood in companies deteriorated. And more and more companies are reporting that orders are missing: both in industry and in the service sector.
The consequences are already foreseeable. In international comparison, Germany is likely to continue to lag behind. Economic researchers expect more growth in Spain, Italy and France than in Germany. The difference is likely to be particularly large compared to the USA, where the economy recently grew by more than three percent.
Lower taxes are not a panacea
Economists largely agree on one point: lower corporate taxes alone are unlikely to be enough to help the business location get back on its feet. According to IfW economist Kooths, the quality of the location depends on a whole range of factors. He says: “We can have a higher tax burden here if the location is worth the taxes.” However, Germany gradually ran out of arguments for the location.
ING chief economist Brzeski argues similarly, for whom a tax debate alone is “too narrow-minded”. Germany as a business location doesn’t just consist of taxes: “Then we’ll be competing with Ireland or Luxembourg. And we can’t manage that.”