IMF presses Germany to invest more to cut TS

Echoes Macron call for end to German fiscal conservatism

BERLIN, May 14, (RTRS): The International Monetary Fund on Monday stepped up pressure on Chancellor Angela Merkel’s government to help reduce Germany’s high trade surplus by further increasing its public investment.

Germany should also consider pension reforms to lengthen working lives, mitigating the need for workers to save so much for retirement and lower the risks of old-age poverty, the Fund said.

The IMF and the European Commission have long urged Germany to boost domestic demand by lifting wages and investment to reduce what they call global economic imbalances. Since his election, US President Donald Trump has also repeatedly criticised Germany’s export strength.

The IMF said boosting productivity growth and investment would raise Germany’s long-term growth potential and reduce its “persistently large current account surplus” - the broadest measure of goods, services and investment flowing into and out of the country.

“The new government’s coalition agreement contains several welcome measures which will continue to address some of these challenges,” the IMF said in its annual policy recommendations.

“Yet the current favourable economic environment provides an opportunity for the new government to take more forceful policy actions,” the IMF added.

French President Emmanuel Macron gave a speech in Germany last week in which he urged it to wean itself off the “fetish” of fiscal conservatism if it wants to become a leading force for European renewal.

In January, IMF chief Christine Lagarde warned that ballooning current account surpluses in countries such as Germany were partly responsible for the rise of protectionism elsewhere.

In its recommendations, the IMF said Germany should use the “ample available space within the fiscal rules” to further increase public investment in infrastructure and education.

Asked if Finance Minister Olaf Scholz should ditch his predecessor’s goal of a “black zero” budget that incurs no new debt and instead issue at least some new bonds to boost investment, IMF economist Julie Kozack said prudent fiscal policy was important.