German central bank sees no need for economic stimulus in the German country for now, although the strength of the Eurozone’s largest economy has shrunk in the second quarter of this year.
The German central bank Bundesbank does not consider an immediate increase in German public spending, admitted by Finance Minister Olaf Scholz, on Sunday, August 18, to deal with the country’s economic slowdown and fears that a crisis scenario might arise. become real, according to Bloomberg.
German Chancellor Angela Merkel had also admitted last week that while the economy was “entering a difficult phase”, she stressed that she saw no need for immediate fiscal stimulus.
Germany’s central bank economists expect GDP growth to fall further by 0.1% in the third quarter of this year, the same rate of a slowdown as the previous three months. In an economic context, two consecutive quarters of contraction means that the economy is in a technical recession.
Despite this, the economy’s debt is expected to fall from 60.9% of GDP in 2018 to 58% in 2019, falling below the 60% threshold set by European rules and thus giving the country more scope to increase spending.
Even with sovereign debt interest below zero, the government has been reluctant to abandon its balanced budget policy. However, it is eyeing more extreme measures if the trigger for the recession starts to be tightened. In this sense, Olaf Scholz He was confident that Germany was prepared to fight a crisis “with full force”.
Last week, Der Spiegel magazine said that the German government could be on the verge of a kind of budgetary revolution and abdicate, at least for a limited period of time, the balanced budget rule.
