IMF calls for German structural reforms, public sector investments

Germany must implement structural reforms and boost public sector investment to tackle recession, according to Alfred Kammer, the European head of the International Monetary Fund (IMF).

“Structural reforms are essential, without doubt. However, the public sector in Germany also has to invest more, because without a functioning infrastructure there can be no productive economy. There has been a lot left here in recent decades.” Kammer told an interview with Sueddeutsche Zeitung Newspaper on Monday.

He suggested Germany could relax its debt brake, which limits the budget deficit to 0.35 per cent of GDP, to free up funds for investment without risking fiscal sustainability.

“Germany should actually revise the current credit rules for the federal and state households in order to create more space for public investment. We as the IMF have calculated some time ago: the debt brake can be relaxed – and the government debt ratio is still falling.”

While Finance Minister Christian Lindner remains firm on adhering to the debt brake, Economy Minister Robert Habeck recently proposed a multibillion-euro investment fund to spur growth.

Kammer advised that clear, long-term policies, particularly around climate initiatives, are essential to encourage private investment. “Companies will only invest if they know what is going to happen in the next ten to 15 years,” he stated.

Attribution: Reuters & Sueddeutsche Zeitung

Subediting: Y.Yasser