Berlin – Leading economist Moritz Schularick has sharply criticized the German government’s debt policies, accusing the current cabinet of wasteful spending. Schularick, president of the Kiel Institute for World Economy, warns of political self-deception and “senseless gifts” to voters.
In March, Schularick and three other economists proposed reforms to the debt brake. According to Schularick, those warnings were ignored, resulting in delayed investments and blurred lines between necessary expenditures and less justifiable ones. He acknowledges that distinguishing between the two isn’t always straightforward.
However, Schularick contends that the government’s subsequent actions undermined any serious fiscal discipline. He specifically criticizes the simultaneous promise of measures like the “Mütterrente” (mothers’ pension), a value-added tax reduction for the hospitality industry, and an increased commuter allowance – all of which he deems economically unjustifiable.
Constitutional Amendment – Crisis Remains
Schularick finds the government’s approach inexplicable. “We changed the constitution to allow for debt, and six months later we have another budget crisis because of senseless gifts,” he stated. He believes this situation is difficult to explain to the public.
He questions whether the government is using available funds effectively, stating they have not demonstrated a particularly good record thus far. He reports seeing no convincing plans for defense, infrastructure, or housing.
Little Hope for Major Reforms
Schularick expresses skepticism about the possibility of fundamental social welfare reforms under the current government. He believes a “black-green” coalition (a potential alliance of center-right and environmentalist parties) would likely have achieved more. He characterizes the current grand coalition as embodying an outdated model of the German social state.
In this political climate, he argues, significant changes are unlikely. Even simple improvements are being neglected, and the EU’s internal market agenda is being pursued “without emphasis.”
Schularick expresses “great concern” about 2026, concluding that it is “remarkable that we are putting so much public money into circulation and yet getting so little economic growth in return.”
Frequently Asked Questions
What specific policies does Schularick criticize as “senseless gifts”?
Schularick specifically criticizes the “Mütterrente” (mothers’ pension), the value-added tax reduction for the hospitality industry, and the increased commuter allowance, stating these are economically unjustifiable.
What was the original purpose of the reforms proposed in March?
The reforms proposed in March aimed to address the debt brake, a constitutional rule limiting government borrowing.
What is Schularick’s outlook for the future?
Schularick expresses “great concern” about 2026 and believes that despite significant public spending, economic growth remains low.
Given these criticisms, what steps might be necessary to restore confidence in Germany’s fiscal policy and promote sustainable economic growth?
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