By Maria Martinez
BERLIN -Economists in Germany say the new government’s lack of structural reforms, particularly to curb pensions costs, poses long term problems for Germany, even though a massive spending program will boost the economy in the short run.
Germany’s anaemic economy could be facing a third consecutive year of contraction and reviving growth is one of the main tasks of Chancellor Friedrich Merz’s government.
Economists at German universities are critical of Merz’s first 100 days in office. A survey by the Ifo economic institute showed on Wednesday that 42% of the 170 professors gave the new government’s economic policy measures a negative rating, while only a quarter valued them as positive. “A pension reform is urgently needed, but the measures taken by the German government are heading completely in the wrong direction,” said Ifo researcher Niklas Potrafke. The economists surveyed were critical in particular of the expansion of the “mothers’ pension”, a pension supplement that credits parents – primarily mothers – for time spent raising children, as well as the lack of an increase in the retirement and pensionable age. The most positive policy, according to the economists, is the strengthening of public investment, with a special fund worth 500 billion euros for infrastructure. They were also positive about the “investment booster,” which offers improved depreciation options for companies, as well as additional defence spending and an announced reduction in corporation tax. In the short term, half of those surveyed expect a positive impact on the economy from the government’s measures to date, while only 12% expected negative effects. By contrast, the economists are more sceptical when it comes to medium-term growth prospects: 34% are fairly positive, while a total of 26% take a negative outlook. “Market-oriented structural reforms are needed to create sustainable economic growth but there is no sign at present of any such reforms,” said Potrafke.
(Reporting by Maria Martinez, Editing by Miranda Murray and Toby Chopra)
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