Ger­many’s Schaeu­ble hits back at Brus­sels

Kuwait Times - - BUSINESS -

The Euro­pean Com­mis­sion’s call for fis­cal stim­u­lus should not be di­rected at Ger­many, Fi­nance Min­is­ter Wolf­gang Schaeu­ble said yes­ter­day, ar­gu­ing Europe’s big­gest econ­omy has in­creased in­vest­ment more than the euro zone av­er­age in the last decade. The com­mis­sion, which is the Euro­pean Union’s ex­ec­u­tive body, called last week for Ger­many and other euro zone coun­tries to loosen over­all bud­gets next year to create more growth and jobs, a plea also aimed at ad­dress­ing the rise of pop­ulist par­ties in Europe.

Such a move would be a sharp re­ver­sal of EU pol­icy, which has been fo­cused on bud­getary dis­ci­pline and aus­ter­ity for most of the eu­ro­zone’s ex­is­tence. Pop­ulist par­ties have fed on the re­sult­ing dis­con­tent. Chan­cel­lor An­gela Merkel’s con­ser­va­tives, for ex­am­ple, will cam­paign for next Septem­ber’s elec­tion in an in­creas­ingly frac­tured po­lit­i­cal land­scape, in which the far-right Al­ter­na­tive for Ger­many (AfD) is likely to en­ter the na­tional par­lia­ment for the first time. “I think the EU Com­mis­sion’s rec­om­men­da­tions are ad­dressed at the wrong coun­try,” Schaeu­ble told the Bun­destag lower house of par­lia­ment in a gen­eral bud­get de­bate, adding in­vest­ment in Ger­many grew 3.9 per­cent a year be­tween 2005 and 2015, com­pared with a rise of 0.7 per­cent in the eu­ro­zone. Schaeu­ble, a veteran mem­ber of Merkel’s con­ser­va­tives and renowned for his fis­cal hawk­ish­ness, said the govern­ment was able to in­crease spend­ing thanks to low bor­row­ing costs and ris­ing tax rev­enues.

But tax rev­enues would slow in com­ing years and in­ter­est rates would not get any lower, giv­ing Ger­many less fis­cal room for ma­noeu­vre as it plans to hike spend­ing on de­fense and on tack­ling the causes of mi­gra­tion in Africa, Schaeu­ble warned. The Cologne In­sti­tute for Eco­nomic Re­search low­ered its 2017 fore­cast for Ger­man growth to 1.0 per­cent from 1.5 per­cent pre­vi­ously, cit­ing po­lit­i­cal un­cer­tainty af­ter Bri­tain’s vote to leave the EU and the elec­tion of Don­ald Trump in the United States.

The govern­ment ex­pects growth to slow to 1.4 per­cent next year from a pre­dicted ex­pan­sion rate of 1.8 per­cent this year which would be the strong­est in half a decade.

Schaeu­ble urged all po­lit­i­cal par­ties to be as hon­est and re­al­is­tic as pos­si­ble about Ger­many’s fis­cal pos­si­bil­i­ties in the up­com­ing elec­tion cam­paign. “The bet­ter we man­age this, the less space we’ll leave for those who want to weaken democ­racy with dem­a­gogic and pop­ulist paroles,” Schaeu­ble said.

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