German finance chief Olaf Scholz rebuffs criticism that his country isn’t spending enough
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Germany’s finance chief has rejected widespread criticism that his country is not investing enough.
Europe’s largest economy benefits from a fiscal surplus as well as negative interest rates when issuing government debt. This is taking place at a time when its economy is slowing down, leading different economists and institutions, including the European Central Bank, to suggest Berlin should loosen the purse strings.
However, speaking to CNBC in an exclusive interview, German Finance Minister Olaf Scholz has made it clear that Germany is “not willing to have extra debts.”
“We are spending a lot of money for investment, for public investment, we have (had) an expansionary fiscal policy in the last years. The only thing, which is different to other countries is that we are not willing to have extra debts, if there’s no need for (it) and this is the situation,” Scholz told CNBC’s Annette Weisbach on Tuesday.
Pressure on Germany‘s government to spend more has gained more prominence over the last year following weaker economic data. In particular, Germany’s powerful manufacturing sector has been hit significantly due to world trade conflicts.
German factory activity recorded its eighth month of consecutive contraction in August. Weaker demand is leading to lower production and job cuts.
“The economic situation in Germany is still stable, we have lower growth, but we will (have) better growth in the next year,” Scholz told CNBC, adding that the country’s labor market is robust.
Germany’s real GDP (gross domestic product) is expected to reach 0.5% in 2019 and 1.5% in 2020, according to the government’s 2020 budget plan. The same document foresees an unemployment rate of 2.9% in 2019 and of 2.7% in 2020.
Scholz explained that much of the economic slowdown seen in Germany throughout 2019 was caused by external factors, such as the trade war.
“It is absolutely necessary that we understand that there are some things we can do, but most things could be done internationally, solving conflicts, because this would help the world economy to grow,” he said.