Ifo President Clemens Fuest Sounds Alarm on Germany's Economic Decline and Urges Urgent Reforms
Ifo Institute President Clemens Fuest warns of Germany's ongoing economic decline due to rising state spending and stagnant private investment, urging urgent reforms including halting the Mütterrente and reducing bureaucracy.
- • Government spending in Germany has increased sharply since 2015, outpacing stagnant private investments.
- • The rise in state expenditures threatens growth, tax revenue, and public service funding.
- • Clemens Fuest calls for a comprehensive reform plan beyond the coalition agreement within six months.
- • He urges stopping the Mütterrente and reducing bureaucracy to improve the economic climate.
Key details
Clemens Fuest, president of the Ifo Institute, has issued a stark warning about Germany's prolonged economic decline, highlighting troubling trends where government spending has soared while private investment has stagnated. In interviews with Deutschlandfunk and Focus, Fuest described the situation as dramatic and acutely threatening the nation's prosperity.
Since 2015, state consumption in Germany has risen by over 25%, yet private investments have remained at 2015 levels, posing risks of lower economic growth and declining tax revenues. This fiscal imbalance endangers the funding of public services and risks worsening living standards for millions. Fuest cautioned that without reforms, Germany could face conditions comparable to those seen in Italy, signaling serious socio-economic challenges ahead.
To counter this, Fuest calls on the federal government to deliver a comprehensive reform plan within six months that goes beyond the current coalition agreement. His recommendations emphasize halting the Mütterrente (mother's pension) to avoid increasing pension contributions and reducing bureaucratic burdens on businesses. According to Fuest, freeing companies from excessive bureaucracy could boost prosperity by as much as 146 billion euros annually.
These reforms are seen as critical to reversing Germany's economic stagnation by reigniting private investment and ensuring sustainable public finances. Fuest's warnings underscore an urgent need for policy measures to restore economic dynamism and protect the welfare of German citizens.