Angela Merkel once described the temptation to take on debt as “sweet poison.” For the opposition Green Party, the situation is just the opposite: it is a potential cure for Germany’s illness.
In the three months before the federal election, the Green Party’s voter turnout was about 20%. They stated that to modernize Germany and achieve carbon neutrality within 20 years, public investment must increase by 50 billion euros per year in the next ten years. .
In order to achieve this goal, they want to completely reform “Debt brake”During the 2009 financial crisis, the German Constitution will strictly restrict new borrowing.
“The pandemic has indeed exposed all of our deficits in this country-especially in terms of digitalization and public management,” said Lisa Bowes, spokesperson for Green’s financial policy. “This is the result of the debt brake. This is why we cannot go back to the old rules after Corona.”
Even before the pandemic, the Germans Worried about their infrastructureThe National Development Bank KfW estimates that the country’s investment gap is 149 billion euros, meaning that the municipality urgently needs funds to repair dilapidated bridges, schools and swimming pools.
Then the coronavirus crisis pushed Germany’s shortcomings to More obvious relief. People are shocked to find that their public health office still communicates via fax. They are angry at the slow pace of Covid-19 vaccination and the bureaucracy involved in making appointments.
The Green Party has what they call a simple solution to the investment gap: They want to limit Germany’s debt brake to consumer spending, that is, when the government purchases currently used goods and services, but excludes investment spending from the rules. Here, the party stated that it should allow some new borrowings to be used to create new public assets.
The idea is that years of insufficient investment have led to another kind of debt-as the Green Party’s manifesto says, “These debts are not on the books, but they will endanger our prosperity.” They said that in the future, especially in terms of climate, kicking out cans will only lead to higher costs and more debt in the future.
Opinion polls show that a large proportion of voters like the idea of increasing national investment. It has also received the support of some leading economists in Germany. Marcel Fratzscher, director of the German Institute for Economic Research in Berlin, said: “This is not a new idea they came up with.” “People generally think that investment drivers like this are needed.”
Others are skeptical. “The Green Party’s plan is based on the idea that zero interest rates will continue to exist,” said Andreas Meyer-Schwickerath, the head of the German economic think tank OMFIF. “But what happens if they rise by 1-2%? You end up in a debt trap.”
The rules the Green Party wants to reform limit new borrowing to 0.35% of GDP, which has actually been on hold for several months. After the outbreak of the new crown virus crisis, Finance Minister Olaf Scholz immediately suspended it, a move that allowed him to raise a record 370 billion euros in pandemic-related debt since 2020. Scholz recently announced that he will Borrow another 100 billion euros In 2022.
The center-left Social Democratic candidate for Prime Minister Scholz now hopes to restore the debt brake in 2023 instead of the originally planned 2022, but it has already Rejected call Abolish it completely.
In an interview with the Financial Times last month, he said that the Green Party is hypocritical because they know that there is no parliamentary majority to amend the constitution.The center-right CDU prime minister candidate Armin Laschet (Armin Laschet) is Also oppose any changes.
Paus, a trained economist, acknowledged that removing the debt brake from the Constitution would be a challenge. “If this doesn’t work,” she said, “then we must consider other options-maybe through KfW organization investment [or] Create a federal investment fund, back it with equity capital, and let it borrow. “
But this will only happen if the EU relaxes fiscal rules. This is also a green goal. “If the rules are too strict and lack economic significance to prevent us from doing what is politically necessary, then we must change,” the Green Party co-leader Robert Harbeck wrote in January.
During the pandemic, the fiscal rules stipulated in the EU’s Stability and Growth Pact were relaxed in any case. But conservatives in the EU insist that the SGP’s basic framework limits debt to 60% of GDP and budget deficit to 3%. Can not change.
Paus said that when the average debt-to-GDP ratio in Europe is 90-100%, reforms are clearly needed. She said: “There is no need to dogmatize this, only stick to 3% and 60%.”
The Green Party’s enthusiasm for reform does not stop there. They also formulated an ambitious plan for the 750 billion Euro Coronavirus Recovery Fund established by the European Union last year, which aims to help EU countries deal with the economic consequences of the pandemic.
The fund has caused controversy in Germany. Angela Merkel can only reassure her fellow Christian Democrats that this is a one-off, selling them the idea of the EU to raise a common debt. In contrast, the Green Party hopes to transform the fund into a “permanent investment and stability tool” that can invest in “important future-oriented economic sectors.”
Whether they can realize any of their ideas remains to be resolved. If a Christian Democrat-Green Party coalition is elected, as many expected, conservative resistance to its reform plan will be fierce.
But Paus said the voting public is on their side, and support for more generous investment is growing. “People in this country want a functioning country,” she said. “Frankly, they are embarrassed about how far Germany is behind.”