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☆ German budget crisis will haunt economy for years
▼ + stars: | 2023-11-24 | by ( Pierre Briancon | ) www.reuters.com time to read: +4 min

LONDON, Nov 24 (Reuters Breakingviews) - The German government is working hard to demonstrate the foolishness of the country’s iron-clad ban on large budget deficits. The budget crisis will cripple the economy for years to come, for three reasons. The debt brake, which limits structural budget deficits to 0.35% of GDP, has only been suspended for this year’s budget. Public net investment has been negative for 20 years, Marcel Fratzscher, head of the German Institute for Economic Research, has pointed out. The country is not on the cusp of a debt crisis.

Persons: Carsten Brzeski, That’s, Marcel Fratzscher, Christian Lindner, Lindner, George Hay, Streisand Neto Organizations: Reuters, Constitutional, Organisation for Economic Co, Development, ING, German Economic Institute, Public, German Institute for Economic Research, German, Germany’s, Thomson Locations: Europe, Berlin

☆ German Court Says Government Cannot Shift Covid Funds to Climate Projects
▼ + stars: | 2023-11-15 | by ( Melissa Eddy | More About Melissa Eddy | ) www.nytimes.com time to read: +2 min

Why It Matters: A Restraint on Germany’s Green Ambitions. The Climate Transformation Fund has €212 billion dedicated to projects from 2024 to 2027. The court ruled that it must now be reduced by €60 billion, the money added from unused pandemic funds. Heart of the Issue: Germany’s ‘Debt Brake’Germany is the only leading industrial economy to have a so-called debt brake written into its constitution. “The circumvention of the debt brake is becoming increasingly absurd,” said Marcel Fratzscher, head of the German Institute for Economic Research, a Berlin-based think tank.

Persons: ”, Marcel Fratzscher, — Organizations: €, German Institute for Economic Research, Social Democrats, Greens, Free Democrats Locations: Germany, Berlin, Ukraine

☆ German Government Slashes Spending, Except on the Military
▼ + stars: | 2023-07-05 | by ( Melissa Eddy | ) www.nytimes.com time to read: +2 min

Why It Matters: Germany has long neglected military spending. Despite intense pressure from the United States, Germany last spent 2 percent of its G.D.P. on defense in 1991, a year after the reunification of the former East and West German nations, according to statistics from the World Bank. The United States is using incentives, including tax breaks, to lure businesses in the green energy and technology sectors. “Germany is increasingly falling behind when it comes to investment and location decisions,” said Tanja Gönner, general director of the German Federation of Industries.

Persons: Marcel Fratzscher, Lindner, ”, Tanja Gönner Organizations: World Bank, German Institute for Economic Research, German Federation of Industries Locations: Germany, United States, West, Russia, Ukraine

Summary German public sector secures 5.5% rise for 2024Deal sets precedent, piles pressure on ECB's forecastsECB to raise rates on May 4FRANKFURT, April 24 (Reuters) - The "very generous" pay rise secured by Germany's public sector workers may complicate the European Central Bank's fight against inflation, analysts said on Monday. "The permanent increase next year may raise some eyebrows at the ECB because wages were supposed to peak this year," Natixis economist Dirk Schumacher said. Other economists noted the German public sector pay agreement followed a period of falling real wages, when prices grow faster than salaries. "Doves may argue that the deal comes after a period of wage restraint and is reasonably front-loaded," Christian Schulz, an economist at Citi, said. "This means that it will probably take at least another five years for public sector wages to recover this loss of purchasing power and for employees to have the standard of living they had in 2021," Fratzscher said.

☆ No all-clear yet for European banks after SVB collapse - German economist
▼ + stars: | 2023-03-14 | by ( ) www.reuters.com time to read: +1 min

BERLIN, March 14 (Reuters) - European banks are not completely in the clear after the collapse of Silicon Valley Bank (SIVBV.UL) and Signature Bank (SBNY.O) even though they do not face a systemic risk, the president of German economic research group DIW said on Tuesday. But he said many European banks were also facing this issue. "We have to be very careful," Fratzscher said, adding that German banks haven't fully recovered from the 2008 financial crisis initiated by the fall of Lehman Brothers, which had "systemic meaning" and caused a domino effect. "We don't see that in the case of SVB, which is relatively small," he said. Reporting by Maria Martinez; Editing by Miranda Murray and Alison WilliamsOur Standards: The Thomson Reuters Trust Principles.

☆ Germany's half-a-trillion dollar energy bazooka may not be enough
▼ + stars: | 2022-12-15 | by ( Christoph Steitz | ) www.reuters.com time to read: +8 min

Almost half a trillion dollars, and counting, since the Ukraine war jolted it into an energy crisis nine months ago. The money set aside stands at up to 440 billion euros ($465 billion), according to the calculations, which provide the first combined tally of all of Germany's drives aimed at avoiding running out of power and securing new sources of energy. That equates to about 1.5 billion euros a day since Russia invaded Ukraine on Feb. 24. Energy rationing is a risk in the event of a long cold spell this winter, Germany's first in half a century without Russian gas. There's no security in sight either, with the push to build up of two alternatives to Russian fuel - liquefied natural gas (LNG) and renewables - years away from targeted levels.

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