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Reforming Germany’s debt rules will not solve economic ills — Kukies

Agency Report –

Reforming Germany’s strict constitutional rules on government borrowing will not solve the country’s economic problems, Finance Minister Jörg Kukies said in Davos on Thursday.

Speaking on a panel at the World Economic Forum, Kukies said Germany must “focus on growth potential” by addressing structural issues.

“Our problems are not just cyclical, they are deeply structural,” the minister said.

Eliminating the so-called debt brake to encourage government spending on infrastructure, schools and bridges is not enough, Kukies argued, with parallel reforms necessary to achieve long-lasting growth.

The minister’s comments came hours after the head of Germany’s central bank, the Bundesbank, called for the constitutional restriction to be overhauled.

Kukies said that under the existing framework, Germany had been able to create financial leeway in recent years to address challenges such as the coronavirus crisis.

Nevertheless, he is in favour of “very targeted reforms” to the rules.

Critics believe the debt brake, which broadly restricts the German government’s capacity to borrow funds, has limited much-needed investment in Europe’s largest economy.

Reforms to the measure are one of the key campaign issues ahead of Germany’s election on February 23.

Sourcedpa

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