Latest news with #CouncilofEconomicExperts
Local Germany
5 days ago
- Business
- Local Germany
Is Germany headed for a period of austerity?
Over the weekend, economics expert Veronika Grimm spoke up to warn that the government's budget plans aren't sustainable. Grimm, who is a member of Germany's Council of Economic Experts, which evaluates the country's economic policies, warned that, "We will not be able to finance the system [as it is] in the long term." She added, "This also means that we will have to cut benefits from time to time." "We need more honesty in pension, long-term care and health insurance about which services we can really afford and which we cannot," she told the Funke media group. Grimm suggested that people living in Germany need to be aware that the state-funded pension system, as well as long-term care benefits for the elderly, will likely need to scaled back in the future. Appearing to speak directly to government leaders, she said, "If you make promises to people that you can't keep in the end, then they don't make private provisions, even though many could." The black-red coalition government - comprised of the conservative Christian Union parties (CDU/CSU) and the centre-left Social Democrats (SPD) - has so far embarked on an ambitious spending spree. They quickly succeeded in loosening the country's debt brake and getting approval to significantly up the country's debt in order to fund massive expenditures in defence and infrastructure, as well as maintaining the pension system. But as they pour money into these areas, they've also warned about needing to cut back spending elsewhere. Cuts in unemployment benefits and health insurance Introducing Germany's budget for 2026 , Finance Minister Lars Klingbeil (SPD) warned that the country's new debt will be "one of the biggest domestic challenges" to navigate in the coming year. Advertisement To that end, we've heard a number of proposals from leading politicians about where budgets could be trimmed back. For example, CSU chair Markus Söder said last week that he'd like to see Bürgergeld (citizen's allowance) benefits scrapped for all Ukrainian refugees - as opposed to just the new arrivals as the black-red coalition had already agreed. CDU General Secretary Carsten Linnemann has advocated more broadly for the complete withdrawal of Bürgergeld from recipients who don't accept work offers. Another area that could see services cut back: statutory health insurance benefits. According to media reports, a gap of around €12 billion will be seen for health insurance funds from 2027. The government has so far neither confirmed nor denied the figure, but chairman of the board of directors of statutory health insurance provider Techniker-Krankenkasse (TK) confirmed the financing gap and openly criticised the Finance Minister. German Finance Minister and Vice Chancellor Lars Klingbeil arrives for a press conference to present a draft of Germany's federal budget for the year 2026. (Photo by John MACDOUGALL / AFP) For his part, Chancellor Friedrich Merz had spoken in favour of reducing health insurance expenditures in his summer interview with ARD . "Where does personal responsibility begin?" Merz quipped. READ ALSO: After busy first 100 days, Germany's Merz faces discord at home Pensions guaranteed until 2031 One place the government doesn't want to makes cuts is to pension payments. This week, the Federal Cabinet launched a pension law intended to ensure a stable pension level until 2031, it will also expand pensions for millions of mothers ( Mütterrente ). READ ALSO: Tax cuts and pensions - How Germany's budget changes could impact you Advertisement Funding for the pension system is to be paid for with taxpayers' money. Working people and employers are set to see pension contributions rise slightly in 2027 - from today's 18.6 to 18.8 percent. Increasingly large pension costs are all but guaranteed in Germany's future. As The Local columnist, Brian Melican put it in a recent op-ed on the issue : "As pensioners make up an ever-growing proportion of the electorate, no major party will campaign to make them even marginally worse-off." Criticism of austerity politics Responding to Grimm's warning, SPD parliamentary group leader Dirk Wiese told the Funke newspapers, "The neoliberal approach of seeking solutions only by cutting benefits for citizens in our country is too simplistic and does not get our approval." Green parliamentary group vice-chairman Andreas Audretsch further criticised that women would be plunged into old-age poverty if pensions were to be further reduced. "We have to look at other adjusting screws, for example, by enabling people to work..." Austerity measures, particularly cuts to government services and increases in taxes, have been linked to adverse impacts on the poorest segments of the population. Also, research has linked austerity measures with both electoral abstention and votes for non-mainstream parties. In other words, cuts to services and welfare in Germany could be expected to boost votes for far-right and far-left parties - exactly the opposite of what conservative CDU/CSU leaders say they are trying to avoid.
New Straits Times
7 days ago
- Business
- New Straits Times
Germany's economy at risk, expert warns, as Merz nears 100 days
BERLIN: Just under 100 days after taking office, Germany's new conservative-led coalition government faces a sobering assessment from leading economic expert Veronika Grimm, reported German news agency dpa. While the economy shows some signs of hope and key sentiment indicators have improved slightly, Grimm told the Funke media group that "the government has yet to deliver." Chancellor Friedrich Merz's governing coalition will mark its first 100 days in office next Wednesday. He came to office on promises to kick-start Europe's biggest economy after two years of contraction. Grimm is a member of the five-person Council of Economic Experts, which evaluates the economic policies of the government and offers its advice. They are appointed by the German president. Grimm criticised the coalition for distributing financial handouts - such as pension increases, subsidies on diesel fuel for farmers, and relief for hospitality businesses - without a clear long-term plan. "Germany must at last do its homework and tackle thoroughgoing reform," Grimm said in the remarks published on Saturday. "So many electoral gifts are being distributed that huge budgetary holes are opening up – and this before a discussion on tax rises," she said. Grimm called for business taxes to be reduced and red tape cut – "from the conditions on the labour and housing markets through rules on climate and up to data protection." "German business is being held back by a veritable thicket of regulation," Grimm concluded.
RTÉ News
21-05-2025
- Business
- RTÉ News
German economic advisory panel forecasts stagnation this year
The German Council of Economic Experts has cut its economic forecast for the German economy, now expecting Europe's biggest economy to stagnate this year as it sees a "pronounced phase of weakness". The academic body that advises the German government on economic policy had predicted the economy to grow 0.4% this year in its previous forecasts published in November. Germany was the only member of the G7 advanced economies that failed to grow for the last two years, burdened by fiscal restraints and an industrial downturn. The tariffs announced by US President Donald Trump are expected to deal a major blow to its export-oriented economy. "The German economy will be significantly influenced by two factors in the near future - US tariff policy and the fiscal package," said Monika Schnitzer, chairwoman of the Council of Economic Experts. The US was Germany's biggest trading partner in 2024 with two-way goods trade totalling €253 billion. On the bright side, Germany approved in March a fiscal plan which includes a €500 billion special fund for infrastructure investments, and largely removes defence investment from rules that cap borrowing. The fiscal package offers opportunities to return to a growth path, economists say. Starting in 2026, the funds provided by the fiscal package will set positive impulses for investment in construction and equipment as well as government spending, the council said, forecasting 1% growth next year. Private consumption is also expected to grow somewhat stronger in 2026 compared to 2025, as disposable incomes will increase more significantly in real terms, the council added.
Saudi Gazette
18-03-2025
- Business
- Saudi Gazette
Germany set to vote on historic increase in defense spending
BERLIN — What happens in Berlin on Tuesday will impact the entire future of Europe's defense and its ongoing support for Ukraine. Germany's Parliament, the Bundestag, is voting on whether to take the brakes off defense spending. This could pave the way for a massive uplift in military investment just as Russia makes gains in Ukraine and Washington signals that Europe can no longer rely on US protection. "This vote in the Bundestag is absolutely crucial," says Prof Monika Schnitzer, who chairs Germany's Council of Economic Experts. "After the Munich Security Conference, then the Trump-Zelensky row, Europe got a wake-up call. For the first time Europeans may not be able to rely on Washington. A lot of people had sleepless nights after that." "The outlook for European defense spending hinges on developments in Germany, as the holder of the region's largest defense budget," agrees Dr Fenella McGerty, senior fellow for defense economics at the London-based International Institute for Strategic Studies. Defence spending in Germany rose by 23.2% last year, helping to drive a record 11.7% rise in European defense outlay. "The remarkable initiatives announced in Germany are key to enabling further growth," adds Dr McGerty. "Without them, any progress made on strengthening Germany's military capability may have stalled." Germany's incoming new Chancellor, Friedrich Merz, is in a race against time. The new parliament convenes on 25 March and not everyone is in favour of all this money being spent, especially on defense. Both the far-right AfD party and the far-left Linke have vowed to oppose it. The vote needs two-thirds in favour to go through, so Merz has a better chance of this happening today, under the existing (old) parliament. It then needs to be approved by Germany's upper house. Meanwhile Europe is still coming to terms with the shock of announcements coming from the Trump administration. At last month's Munich Security Conference I watched as delegates sat open-mouthed listening to US Vice-President JD Vance's blistering attack on Europe's policies on migration and free speech. This was preceded days earlier by US Defence Secretary Pete Hegseth telling Nato members that America's 80-year-long defensive umbrella for Europe should no longer be taken for granted. Defense strategists in Europe are already planning for the unthinkable: a semi-victorious Russia making gains in Ukraine, then rebuilding its army and threatening Nato's eastern members, such as the Baltic states, within three years or less. This, at a time when the US commitment to Europe's defense is looking extremely shaky. President Trump is being urged by some in his circle to pull US troops out of Europe and even to withdraw from Nato altogether. There is talk of France extending its national nuclear deterrent to cover other European nations. Meanwhile, most European governments are under pressure to raise defense spending after years of cuts. The British Army has now shrunk to its smallest size since the Napoleonic Wars, over 200 years ago, and experts predict it would run out of ammunition within two weeks of fighting a full-scale conventional war in Europe. Germany has long been cautious about defense spending, not just for historical reasons dating back to 1945, but also due to the global debt crisis of 2009. Which brings us back to today's crucial vote in the Bundestag. It is not just about defense. One part is about freeing up €500bn (£420bn) for German infrastructure – fixing things like bridges and roads, but also to pay for climate change measures, something the Green Party insisted on. The other part is about removing the restrictions in the constitution on borrowing that could, in theory, free up unlimited billions of euros for defense spending, both for Germany's armed forces and for a pan-European defense fund. On 4 March European Commission President Ursula Von der Leyen announced plans for an €800bn defense fund called The ReArm Europe Fund. The proposal being voted on in Berlin is that any spending on defense that amounts to more than 1% of Germany's GDP (national wealth) would no longer be subject to a limit on borrowing. Until now this debt ceiling has been fixed at 0.35 pct of GDP. Other countries will be watching closely to see if this proposal passes. If it does not, then the EU Commission's 'ReArm Europe' project could be off to a shaky start. The challenge today for Europe's security is a stark one. If the US no longer has its back, or at the very least cannot be relied upon to come to Europe's defense, then what does the continent need to do to fill the gap? Let's start with the numbers. According to the Kiel Institute, which meticulously tracks these things, Europe spends just 0.1% of its wealth on helping to defend Ukraine, while the US has been spending 0.15%. "That means," says the Kiel Institute's Giuseppe Irto, "that if Europe is to make up the shortfall then it needs to double its contribution to 0.21%." But regardless of what happens today in Berlin this is not just about money. Many of the most sought-after weapons in Ukraine's armory have come from the US, like Patriot air defense and long-range artillery systems like Himars. The Kiel Institute puts the proportion of Ukraine's rocket artillery at 86% coming from the US, with 82% of its howitzer ammunition also being US-sourced. Then there is the whole question of US intelligence aid for Kyiv, much of it derived from satellites and geospatial imagery. If Washington were to permanently switch that off, then Ukrainian forces risk being partially blinded. If America's nuclear arsenal is taken out of the equation then there is a massive disparity between Russia's 5,000-plus warheads and the combined total of Britain and France's nukes which amount to less than a tenth of that. But that still theoretically leaves enough to act as a nuclear deterrent. When it comes to "conventional", ie. non-nuclear arms, Western defense chiefs are fond of saying that Nato's combined forces are superior to Russia's. Maybe, but if there is one glaring lesson to come out of the Ukraine war it is that "mass" matters. Russia's army may be of poor quality but President Putin has been able to throw such huge numbers of men, drones, shells and missiles at Ukraine's front lines that the Russians are inexorably advancing, albeit slowly and at huge cost. This should not come as a surprise. Moscow put its economy on to a war footing some time ago. It appointed an economist as its defense minister and retooled many of its factories to churn out vast quantities of munitions, especially explosive-tipped drones. While many European nations have dragged their feet over raising defense spending much above the Nato-mandated 2% of GDP, Russia's is closer to 7%. Around 40% of Russia's national budget is spent on defense. So Europe has a fair bit of catching up to do if it is to even come close to shoring up its defense and security. "If the vote passes then it will be significant for Germany and for Europe," says Ed Arnold, senior research fellow for European security at the Royal United Services Institute think tank. "It will set a precedent and allow others to follow... However, three years on from the invasion of Ukraine the case of Germany is a reminder that more money for defense is necessary but not sufficient. "Europe needs defense and security leaders who are able to navigate a rapidly deteriorating Euro-Atlantic security environment. Cultural, rather than financial reform, would be most valuable to Europe right now." — BBC
Yahoo
18-03-2025
- Business
- Yahoo
Germany set to vote on historic increase in defence spending
What happens today, here in Berlin, will impact the entire future of Europe's defence and its ongoing support for Ukraine. Germany's Parliament, the Bundestag, is voting on whether to take the brakes off defence spending. This could pave the way for a massive uplift in military investment just as Russia makes gains in Ukraine and Washington signals that Europe can no longer rely on US protection. "This vote in the Bundestag is absolutely crucial," says Prof Monika Schnitzer, who chairs Germany's Council of Economic Experts. "After the Munich Security Conference, then the Trump-Zelensky row, Europe got a wake-up call. For the first time Europeans may not be able to rely on Washington. A lot of people had sleepless nights after that." "The outlook for European defence spending hinges on developments in Germany, as the holder of the region's largest defence budget," agrees Dr Fenella McGerty, senior fellow for defence economics at the London-based International Institute for Strategic Studies. Defence spending in Germany rose by 23.2% last year, helping to drive a record 11.7% rise in European defence outlay. "The remarkable initiatives announced in Germany are key to enabling further growth," adds Dr McGerty. "Without them, any progress made on strengthening Germany's military capability may have stalled." Germany's incoming new Chancellor, Friedrich Merz, is in a race against time. The new parliament convenes on 25 March and not everyone is in favour of all this money being spent, especially on defence. Both the far-right AfD party and the far-left Linke have vowed to oppose it. The vote needs two-thirds in favour to go through, so Merz has a better chance of this happening today, under the existing (old) parliament. It then needs to be approved by Germany's upper house. Meanwhile Europe is still coming to terms with the shock of announcements coming from the Trump administration. At last month's Munich Security Conference I watched as delegates sat open-mouthed listening to US Vice-President JD Vance's blistering attack on Europe's policies on migration and free speech. This was preceded days earlier by US Defence Secretary Pete Hegseth telling Nato members that America's 80-year-long defensive umbrella for Europe should no longer be taken for granted. Defence strategists in Europe are already planning for the unthinkable: a semi-victorious Russia making gains in Ukraine, then rebuilding its army and threatening Nato's eastern members, such as the Baltic states, within three years or less. This, at a time when the US commitment to Europe's defence is looking extremely shaky. President Trump is being urged by some in his circle to pull US troops out of Europe and even to withdraw from Nato altogether. There is talk of France extending its national nuclear deterrent to cover other European nations. Meanwhile, most European governments are under pressure to raise defence spending after years of cuts. The British Army has now shrunk to its smallest size since the Napoleonic Wars, over 200 years ago, and experts predict it would run out of ammunition within two weeks of fighting a full-scale conventional war in Europe. Germany has long been cautious about defence spending, not just for historical reasons dating back to 1945, but also due to the global debt crisis of 2009. Which brings us back to today's crucial vote in the Bundestag. It is not just about defence. One part is about freeing up €500bn (£420bn) for German infrastructure – fixing things like bridges and roads, but also to pay for climate change measures, something the Green Party insisted on. The other part is about removing the restrictions in the constitution on borrowing that could, in theory, free up unlimited billions of euros for defence spending, both for Germany's armed forces and for a pan-European defence fund. On 4 March European Commission President Ursula Von der Leyen announced plans for an €800bn defence fund called The ReArm Europe Fund. The proposal being voted on in Berlin is that any spending on defence that amounts to more than 1% of Germany's GDP (national wealth) would no longer be subject to a limit on borrowing. Until now this debt ceiling has been fixed at 0.35 pct of GDP. Other countries will be watching closely to see if this proposal passes. If it does not, then the EU Commission's 'ReArm Europe' project could be off to a shaky start. The challenge today for Europe's security is a stark one. If the US no longer has its back, or at the very least cannot be relied upon to come to Europe's defence, then what does the continent need to do to fill the gap? Let's start with the numbers. According to the Kiel Institute, which meticulously tracks these things, Europe spends just 0.1% of its wealth on helping to defend Ukraine, while the US has been spending 0.15%. "That means," says the Kiel Institute's Giuseppe Irto, "that if Europe is to make up the shortfall then it needs to double its contribution to 0.21%." But regardless of what happens today in Berlin this is not just about money. Many of the most sought-after weapons in Ukraine's armoury have come from the US, like Patriot air defence and long-range artillery systems like Himars. The Kiel Institute puts the proportion of Ukraine's rocket artillery at 86% coming from the US, with 82% of its howitzer ammunition also being US-sourced. Then there is the whole question of US intelligence aid for Kyiv, much of it derived from satellites and geospatial imagery. If Washington were to permanently switch that off, then Ukrainian forces risk being partially blinded. If America's nuclear arsenal is taken out of the equation then there is a massive disparity between Russia's 5,000-plus warheads and the combined total of Britain and France's nukes which amount to less than a tenth of that. But that still theoretically leaves enough to act as a nuclear deterrent. When it comes to "conventional", ie. non-nuclear arms, Western defence chiefs are fond of saying that Nato's combined forces are superior to Russia's. Maybe, but if there is one glaring lesson to come out of the Ukraine war it is that "mass" matters. Russia's army may be of poor quality but President Putin has been able to throw such huge numbers of men, drones, shells and missiles at Ukraine's front lines that the Russians are inexorably advancing, albeit slowly and at huge cost. This should not come as a surprise. Moscow put its economy on to a war footing some time ago. It appointed an economist as its defence minister and retooled many of its factories to churn out vast quantities of munitions, especially explosive-tipped drones. While many European nations have dragged their feet over raising defence spending much above the Nato-mandated 2% of GDP, Russia's is closer to 7%. Around 40% of Russia's national budget is spent on defence. So Europe has a fair bit of catching up to do if it is to even come close to shoring up its defence and security. "If the vote passes then it will be significant for Germany and for Europe," says Ed Arnold, senior research fellow for European security at the Royal United Services Institute think tank. "It will set a precedent and allow others to follow... However, three years on from the invasion of Ukraine the case of Germany is a reminder that more money for defence is necessary but not sufficient. "Europe needs defence and security leaders who are able to navigate a rapidly deteriorating Euro-Atlantic security environment. Cultural, rather than financial reform, would be most valuable to Europe right now." Can Europe deter Russia in Ukraine without US military? Katya Adler: Fractured Europe seeks credible answers on Ukraine Can Europe fill the gap now the US has paused military support for Ukraine?
