As of: March 13, 2024, 6:00 p.m
By: Max Schäfer
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The bad mood is having an impact on the German economy, says DIW boss Fratzscher.
Necessary investments are not made.
Berlin – The prospects for the German economy are still not very optimistic – in contrast to other countries.
At least Marcel Fratzscher, head of the German Institute for Economic Research (DIW) based in Berlin, is convinced of this.
The researchers expect stagnation in 2024.
The researchers note that “the mood in Germany is extremely bad,” Fratzscher told
Wirtschaftswoche
.
He primarily highlights companies, but also private consumers.
The mood also has an impact on the economy.
“Part of this weakness certainly has something to do with psychology, with the mood, which is significantly worse in Germany than in many other economies.”
DIW boss Fratzscher: A lack of investment by German companies is the “main driver of the poor development”
The DIW, led by Marcel Fratzscher, predicted a decline in the German economy in the first quarter of 2024. The situation is expected to improve afterwards, but overall zero growth is to be expected, according to the forecast published on Thursday, March 7th.
Germany is therefore at the bottom of the list in the EU, but even without Germany, growth in the euro area is only one percent.
“The main driver of the poor development is investment,” said Fratzscher.
“Companies are holding back from investing domestically and are instead investing heavily abroad.” This shows that there is no lack of resources and capital in Germany, explained the expert.
“Many companies are turning away from Germany and looking abroad.”
DIW boss Fratzscher is calling for a “massive boost” in investments to strengthen the economy
Fratzscher describes the lack of private investment as the “actual Achilles heel”.
The DIW President told Wirtschaftswoche that “a massive push is needed
.
”
Fratzscher also noted: “Germany is still attractive.” He points to large investments by companies from abroad, including Intel in Magdeburg, TSMC in Dresden and Tesla in Grünheide, Brandenburg.
Marcel Fratzscher observes that the poor mood means that investments that are necessary for economic development are missing.
(Archive photo) © Bernd von Jutrczenka/dpa
The DIW forecast also criticizes politics.
It says that financial policy hardly contributes to economic development.
Fratzscher renewed the criticism in an interview with
Wirtschaftswoche
.
“Realistically, I see little help, too little help.” The state needs to do more in the areas of digital, energy, transport and reducing bureaucracy.
In addition: “Fiscal policy is too restrictive given the economic problems; it should be significantly more expansive.”
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The ECB's interest rate turnaround and private consumption are bringing an economic upswing - say experts
In order to improve the situation, Fratzscher is calling for the ECB to cut interest rates.
The interest rate turnaround expected by DIW experts for early summer will make saving less attractive.
“Private consumption will become the main driver of the economic upswing,” said Timm Bönk, co-head of the forecasting and economic policy department at DIW.
However, the DIW forecast sees an upswing for the economy through an increase in global production.
This would also increase exports from Germany.
However, researchers expect only moderate growth globally.
Geopolitical crises and Donald Trump as a risk to economic development
The background is conflicts in the Middle East, such as the Houthi militia's attacks on merchant ships in the Red Sea, geopolitical crises such as the Ukraine war and the possible re-election of Donald Trump as US President.
Fratzscher therefore sees the danger that experts will have to adjust their expectations downwards.
Economists also warn against the AfD.
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