Germany Faces Economic Crisis
(MENAFN) Germany's economic situation is becoming "dramatic," with stagnation in the country’s GDP over recent years and unsuccessful efforts to reverse the trend, according to Clemens Fuest, president of the Munich-based ifo Institute.
This think tank is one of Europe’s leading economic research centers. A new report from the ifo Institute reveals that Germany’s economic performance has been stagnant since 2018, as government spending on pensions, education, and infrastructure has surged by 25% since 2015.
However, corporate investment in machinery and factories has dropped below the levels seen in 2015.
Fuest warned that the current economic conditions in Germany could lead to what he described as “italienische Verhaltnisse” – a German term for “Italian conditions” – referring to chronic economic instability, stagnation, and structural inefficiencies that have long been associated with Italy's economy.
"Germany has been in economic decline for years. The situation has become dramatic," Fuest said in an interview with a news agency published on Sunday.
He added that the lack of private investment results in slower growth, lower tax revenues, and fewer resources available for government services in the long run.
The economic downturn is already impacting "millions" of ordinary Germans, as evidenced by the declining standard of living, according to Fuest. He warned that if significant reforms are not implemented quickly, Germany could face a prolonged 25-year period of economic decline.
To prevent this, Fuest called for the government to develop a "comprehensive reform plan" within six months, including changes to the pension system.
He also recommended simplifying bureaucracy for small and medium-sized businesses by eliminating documentation requirements related to CO2 emissions, supply chains, and minimum wages. By doing so, he suggested that Germany could generate up to €146 billion ($170 billion) in additional economic benefits annually.
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