Ger­many told to do more for global growth

The Myanmar Times - - International Business -

PRES­SURE is mount­ing on Ger­many from the in­ter­na­tional com­mu­nity to do more to boost global growth by rais­ing spend­ing, just as it moves to as­sume the lead­er­ship of the pow­er­ful Group of 20.

Europe’s eco­nomic power was told in no un­cer­tain terms dur­ing the IMF-World Bank meet­ings in Wash­ing­ton last week that it is ex­pected to lead the ef­fort to pull world growth out of its slump.

“We believe that some coun­tries have fis­cal space. Well, if so, they should use it,” said Chris­tine La­garde, man­ag­ing di­rec­tor of the In­ter­na­tional Mone­tary Fund.

“We are cer­tainly in­clud­ing in that cat­e­gory coun­tries like Canada, like Ger­many, like Korea,” she added.

Ms La­garde had un­til now only made gen­eral ap­peals to the world’s top economies for fis­cal stim­u­lus in the name of global growth, which the IMF fore­casts will be a tepid 3.1 per­cent this year.

“This is the first time she has ex­plic­itly pointed to Ger­many,” said a Euro­pean source who spoke on con­di­tion of anonymity.

Ms La­garde went even fur­ther, say­ing that the tax cuts an­nounced by the gov­ern­ment of Chan­cel­lor An­gela Merkel were not enough.

Low in­ter­est rates al­low “coun­tries like Ger­many” to tap cap­i­tal mar­kets cheaply to de­velop in­fra­struc­ture, the IMF chief added. The rise in pres­sure came as G20 fi­nance min­sters also met in Wash­ing­ton, chal­lenged to find ways to strengthen the world’s econ­omy.

Cur­rently led by China, the G20 will hand its pres­i­dency over to Ger­many in De­cem­ber.

A source close to the talks on the G20 agenda said that the United States had also di­rectly chal­lenged Berlin to spend more to boost growth.

“The United States chose this IMF mo­ment to pres­sure Ger­many so that it will put cer­tain items on the agenda for its pres­i­dency next year,” the per­son said. Among the items in ques­tion: a call on coun­tries with bud­get sur­pluses to spend more.

The US has been press­ing Ger­many for years since the fi­nan­cial cri­sis to do more to en­hance growth, reg­u­larly point­ing to the weak­ness of Ger­man do­mes­tic de­mand com­pared to ex­ports.

In­deed, its large trade and bud­get sur­pluses make Ger­many a pri­mary fo­cus when the IMF and other in­sti­tu­tions call for “col­lec­tive ef­fort” to put global growth back on track.

Berlin said last week that the Ger­man econ­omy will grow faster than ex­pected this year be­fore slow­ing in 2017 and 2018. Ger­many’s gross do­mes­tic prod­uct (GDP) will in­crease by 1.8pc in 2016 be­fore slow­ing to 1.4pc growth in 2017 and 1.6pc in 2018, Econ­omy Min­is­ter Sig­mar Gabriel said.

The con­fir­ma­tion of Ger­many’s eco­nomic strength only adds weight to calls from EU neigh­bours and global fi­nance chiefs for Berlin to boost growth in the lan­guish­ing eu­ro­zone by ex­pand­ing spend­ing and in­vest­ment. –

‘We believe that some coun­tries have fis­cal space. Well, if so, they should use it.’

Chris­tine La­garde

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