Skip to content
Politics — Finance — Take Control of Your Finances in the Cloud — Navigating Air Safety Regulations

Economists warn Germany's coalition risks financial instability without bold reforms

Germany's financial future hangs in the balance. Can Scholz's coalition defy party resistance and push through the painful reforms experts say are inevitable?

,   and  Administrator
1 min read
The image shows a graph on a white background with text that reads "The Benefits of Increased...
The image shows a graph on a white background with text that reads "The Benefits of Increased Productivity Over the Last 35 Years Have Not Gone to the Middle Class". The graph illustrates the increase in productivity over the last 35 years, indicating that the benefits of increased productivity have not gone to the middle class.

Economists warn Germany's coalition risks financial instability without bold reforms

Two leading economists have questioned whether Germany’s coalition government can push through major financial reforms. Marcel Fratzscher and Oliver Holtemöller both warn that urgent changes are needed to stabilise federal finances. Their comments highlight growing concerns over the country’s economic direction. Oliver Holtemöller, vice president of the Halle Institute for Economic Research (IWH), points to the strong labour market as a key reason for the government’s hesitation. He argues that reforms, particularly in pension policy, are essential for balancing the budget. At the same time, he calls for a shift in subsidies, ensuring support reaches only those who truly need it.

Marcel Fratzscher, president of the German Institute for Economic Research (DIW), shares similar doubts. He believes Chancellor Olaf Scholz has the ability to make bold decisions on subsidies, taxes, and pensions but lacks backing from his own party. Fratzscher proposes cutting subsidies like diesel tax breaks and commuter allowances, describing them as wasteful.

Both economists agree that raising the retirement age is inevitable. Fratzscher predicts Germans will eventually work until 70, pointing to countries like Denmark and Japan as examples. He insists that without such measures, the federal budget will remain under severe strain. The warnings from Fratzscher and Holtemöller underscore the challenges facing the coalition. Without significant reforms in pensions and subsidies, Germany’s financial stability could weaken further. The economists’ remarks put pressure on policymakers to act before the situation worsens.

Read also:

Related

Latest