Home Politics DIW boss Marcel Fratzscher: German economy continues to shrink

DIW boss Marcel Fratzscher: German economy continues to shrink

DIW boss Marcel Fratzscher: German economy continues to shrink

Although the economy grew last year despite the corona crisis, there can be no talk of the all-clear. The Institute for Economic Research fears a negative trend. According to DIW boss Marcel Fratzscher, the significant economic growth in Germany in the past year is no reason to be happy. “The German economy is in a precarious situation,” said the President of the German Institute for Economic Research (DIW) of the “Rheinische Post” (Saturday edition), according to the advance notice. “It probably shrank in the fourth quarter and could also shrink in the first quarter if the incidence figures continue to develop and many people are forced to take sick leave or go into quarantine,” explained the economist. Despite global supply problems and the virus pandemic, gross domestic product (GDP) increased by 2.7 percent in 2021. According to an initial estimate by the Federal Statistical Office, however, economic output fell by 0.5 to 1.0 percent in the final quarter.

Can the debt brake be adhered to?

Fratzscher said he thinks it is very unlikely that the federal government will be able to comply with the debt brake again in 2023. The head of the Ifo Institute, Clemens Fuest, was more confident. “The fact that the debt brake will be observed again from 2023 is simply a requirement of the Basic Law,” said the newspaper. The debt brake forces the state to prioritize spending.

“If the priority for investments increases, the priority for consumption expenditures decreases.” He doesn’t think there will be a lack of money for investments in 2023. “It will be more likely that the money will not flow out because the planning process has not yet been completed.” Finance Minister Christian Lindner (FDP) confirmed on Friday that he wanted to comply with the debt brake from 2023.

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