German Finance Minister Pushes Back Against Economic Prophets of “Doom”

Kamil Kowalcze and Jana Randow
·2 min read
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(Bloomberg) -- Germany is doing everything it can to bolster its struggling economy and prevent it from becoming the “sick man” of Europe, according to Finance Minister Christian Lindner.

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“Prophecies of doom are inappropriate,” Lindner told reporters Friday in Marrakech, where he’s attending the annual meetings of the International Monetary Fund. “Germany has an enormous turnaround potential and solid economic foundations, and we’re determined to strengthen those foundations.”

Government initiatives include attracting more skilled labor, accelerating planning and approval procedures and cutting back on bureaucracy, he said.

Europe’s biggest economy is under the spotlight after failing to regain momentum following a recession brought on by the war in Ukraine and surging energy prices. It’s the only major economy the IMF predicts will shrink this year.

Doubts have also grown about its longer-term prospects as it confronts an aging workforce, an excessive reliance on trade ties with China and the need to transition quickly to renewable energy sources.

The Bundesbank recently mapped out such key challenges in a report that concluded “there’s broad-based pressure to take action” — even if policymakers have begun to take the right steps.

Joachim Nagel, who heads Germany’s central bank, told the same event that the economy certainly has the potential to catch up with peers and “isn’t the sick man of Europe” — referring to a moniker it was given following its reunification.

Christian Sewing, who heads Germany’s biggest lender — Deutsche Bank AG — echoed that sentiment.

“We need structural reforms with regards to energy prices, with regard to infrastructure, immigration and so on,” he told Bloomberg Television. “If we do this, and this is what we jointly have to push for, the economy but also the government, if we do this I think Germany actually will see growth again.”

The IMF’s updated projections for output to contract 0.5% this year are more or less in line with expectations by the Bundesbank, he said, highlighting the difficulties the country faced due to the energy crisis that followed Russia’s invasion of its neighbor.

Germany’s Economy Ministry this week downgraded is outlook for the country, though it on Friday highlighted that there are signs of a turnaround.

“Recent sentiment indicators such as the Purchasing Managers’ Index, Ifo assessments and ZEW economic expectations — albeit from a low level — suggest that the pace of the economic downturn has slowed and a moderate recovery is likely to set in at the turn of 2023/24,” it said in its monthly report.

Inflation has probably passed its peak and should continue to slow, Nagel said, though the European Central Bank won’t rest until price gains in the 20-nation euro area have returned to the 2% target.

--With assistance from Nicholas Comfort, Francine Lacqua and Iain Rogers.

(Updates with Deutsch Bank CEO in eighth paragraph)

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