This is very unusual: The Economic Advisory Council is divided on what it should recommend to the German government and the EU in the event of debts and investments. While two of the so-called economic fads tremble around the European debt limit of 60% of gross domestic product, the other two are determined to stick to it.
For decades, the board was firmly in the hands of liberal market economists. A lone Keynesian expressed his dissenting opinion in minority votes. That has changed – some say it starts with the title of the new report: Shaping Transformation – Education, Digitization and Sustainability. “It almost looks like a union brochure,” jokes someone close to the council.
In terms of economic development, the wise are more optimistic than other researchers in economics: the German economy will grow by 2.7% this year after the corona shock, expects the Advisory Council. This emerges from the annual report of the wise, which is due on Wednesday and the SZ is available. First the FAZ reported it. The 2.7% is lower than the advisory committee had previously predicted – however, economic experts are still more confident than the top five economic institutes, which are only expecting a 2.4% increase in gross domestic product for 2021.
“The global economy is increasingly recovering from the Corona crisis, but its effects continue to shape economic development,” the Wise Men report said. After delivery problems in particular slow the recovery this year, the recovery will be stronger in 2022, according to the Advisory Council: then the economy is expected to grow 4.6%. Like the institutes, economists expect inflation to be well below 3% again after rising sharply this year.
The SPD, the Greens and the FDP are looking for financial leeway
The report comes just as the SPD, Greens and FDP are negotiating a coalition – and the nearly 500-page report is highly political. Because the traffic light is looking for financial leeway. The SPD and the Greens in particular want to invest significantly more state investments than before, but the FDP does not want to increase taxes or touch the debt brake. What do the wise recommend? Different.
On two important points, there is an impasse between Veronika Grimm and Volker Wieland, who argue more liberally in the market, on the one hand – and Monika Schnitzer and Achim Truger, for whom “the debt financing of public expenditure oriented towards the market. ‘future’ can make economic sense. “According to the current legal opinion, public investment companies are not subject to the debt brake and could be used specifically for financing,” write the two. Grimm and Wieland argue much more conservatively.
There are also clear differences in European budgetary rules. Grimm and Wieland advocate meeting normal limits again by 2023 at the latest. Schnitzer and Truger, on the other hand, consider it “very problematic” to get heavily indebted countries like Italy to pass rules to reduce their debts to 60% of gross domestic product fairly quickly. EU states are also debating debt limits. While some push for relaxation, others are seen as strict adversaries. Both sides should be interested to learn that the opinion of the federal government’s most important economic advisory body is no longer as clearly against easing as it was for decades.
It is interesting to know what the researchers – this time together – determine about the consequences of the Corona crisis: mini-jobbers, low-skilled workers and the self-employed are particularly affected by the Corona crisis. Restrictions on educational opportunities were also severe. But there is a silver lining: high government spending has prevented a wider gap between rich and poor. Disposable income inequality is unlikely to “have increased”, he said.