Germany: Will politicians heed the call for fiscal stimulus? – Rabobank

Rabobank analysts point out that the Germany has become increasingly dependent on exports for its economic performance, supported by an initially strong competitive position and robust demand for capital goods.

Key Quotes

“The negative consequences of this export-led model are now starting to materialize.”

“We believe there is a colossal need for government and private sector investment in infrastructure, climate-related innovation and Germany’s poor digital infrastructure.”

“Germany is also feeling the impact of an ageing population more than other eurozone member states. The negative contribution of labor to future economic growth could be as high as -0.8ppt annually.”

“We argue that adopting an investment fund focused on R&D, capital formation and education could  lead to significantly higher TFP growth.”

“We look at two investment scenarios (€150bn and €450bn) that could lift the country’s potential growth rate.”

“While the government is unlikely to abandon its strict budgetary rules for the €450bn package, we believe a €150bn investment package is possible under the constitution - although it will still take some political will to implement it.”