As of: March 13, 2024, 10:06 a.m
By: Lisa Mayerhofer
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For the former economist Peter Bofinger, Germany is “the sick man of Europe”.
In the interview he talks about how the economy could be stimulated again.
Tegernsee – “Sick man of Europe”, “dramatically bad”: According to numerous experts, the German economy is in the doldrums.
At the end of the year, the gross domestic product (GDP) shrank by 0.3 percent compared to the previous quarter, as confirmed by the Federal Statistical Office.
Nevertheless, the German leading index Dax is rushing from record to record, employment is higher than ever, and Japan is losing its status as the third largest economy to Germany.
How does this fit together and how dire is the situation?
Ippen.Media
spoke about this
with Peter Bofinger, former economist and professor of economics at the University of Würzburg, as part of the Entrepreneur Day at Tegernsee.
Economist Bofinger: “I would first get the construction industry going”
You talked about Germany as the “sick man of Europe”, but we have just overtaken Japan as the third largest economy and inflation is also falling. Is it really so bad?
Peter Bofinger:
Yes.
We only overtook Japan because we had more inflation and the yen exchange rate was weak.
There is no real growth behind this overtaking process and that brings us to the topic: our economy has been stagnating since 2019.
We had this slump with Corona, then we caught up again and we've been stagnating ever since.
Other economies don't do that.
In my opinion, this is a finding that shouldn't be brushed aside so easily.
Just like Finance Minister Christian Lindner (FDP) – in Davos he described Germany as a “tired man after a short night”.
But the problems go deeper.
The German business model consisting of exports, industry and automobiles no longer has a tailwind, but rather a headwind.
And how could we stimulate the economy again?
I would definitely start by getting the construction industry going.
Because we have the absurd situation where we have a crazy shortage of housing and at the same time construction production is more or less collapsing.
One way to counteract this would be to promote social housing.
For example, you can now give housing associations low-interest loans through KfW and increase depreciation relief.
This is also envisaged in the Growth Opportunities Act.
But that initially provided for six percent declining depreciation for housing construction, now it is only five percent.
This is going in the wrong direction; we should actually do a lot more.
Peter Bofinger, former economist and professor of economics at the University of Würzburg.
© dpa
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What other measures could be offered?
It could make it easier for private households to purchase apartments.
In Germany, the ownership rate for private households is less than 50 percent – a fundamental problem!
One could, for example, consider whether wealth creation could be designed in such a way that someone who buys an apartment receives the same support as someone who invests in a company pension scheme, for example.
Of course, you still need blocking options so that if you receive funding you have to live in the property until you retire and if you sell it beforehand, you have to pay back the funding.
What else can be done outside of the construction industry to make Germany future-proof?
The most important thing would be to start an agenda now – a future agenda.
The core question should first be: Where can and do we want to be globally strong in the next ten years?
What are the areas in which we can assert ourselves in global competition and what do we have to do to make it work?
For example, are we doing enough to advance storage technologies, artificial intelligence and autonomous driving in Germany?
So it's about taking stock and not just spending money frantically.
If you have an area you want to invest in, you shouldn't mess around, you should pile on it.
After all, the Growth Opportunities Act will soon come with generous depreciation for companies that start transformations now.
It's just a shame that it has shrunk so much now.
So the Growth Opportunities Act would help the German economy?
Yes.
The depreciation relief provided for in the law is always better than tax cuts.
When taxes are reduced, you get the money without doing anything for it.
Depreciation relief, on the other hand, requires that something is done.
And they don't cost the state that much because it gets the money back.
With depreciation relief, the payment flows are only distributed differently so that you have less at the beginning and more afterwards - a kind of low-interest loan from the government.
Even outside of the Growth Opportunities Act: There are currently calls for political support in many sectors...
I think there aren't that many people calling.
Of course, the energy-intensive areas have massive problems.
This raises the question: Can the affected companies stay in Germany or not?
In my opinion, it would be worth all the effort to help them now to at least survive the next few years - for example with the industrial electricity price.
Even at the risk that it might not work after a few years.
But I find the attitude of some colleagues who say that these companies will just have to go dangerous.
Especially since you can't see at the same time whether something new will come for it.
So you would rather try to keep industries like BASF and so on?
As long as I don't have anything better - and we don't have anything better either.
I don't really see it at the moment.
There are investments in chip companies, but there is also a lot of criticism about that.