Germany’s economy needs more trust in market processes

Germany’s economy needs more trust in market processes

The German government’s board of economic advisors - Sachverständigenrat  der Bundesregierung - published its annual study on November 11 and has downgraded the government’s already low projected growth rate for 2015 from 1.3 per cent down to just one per cent, writes Prince Michael of Liechtenstein.

The study blamed German politics for the lack of growth. This is not the same as in the US or France, which are asking for higher government and consumer spending.

Basically, the problem is seen as too much government intervention and insufficient reform and deregulation in areas such as pensions and the labour market, along with the government’s energy policy. The advisors stress the need for structural reforms instead of unnecessary attempts at redistribution.

The European Central Bank’s expansive monetary measures are also criticised. Instead of overregulation and easy money the advisors stress the importance of the market. They headlined their report, ‘More Trust in Market Processes’ or in German, ‘Mehr Vertrauen in Marktprozesse’.

Optimistically, it sees an opportunity to realign Germany’s economy on efficiency instead of redistribution because the German economy is still robust, writes the renowned daily newspaper Frankfurter Allgemeine Zeitung. The newspaper also correctly comments that an efficient economic policy should primarily enable competition in order to optimise productivity and innovation.

Germany’s coalition government has concentrated on corrective measures instead of observing these policies, which are so fundamental to the social market economy.

GIS has highlighted these problems in the past in a number of reports and statements (see below):

Unfortunately this report - and its wake-up call - may not be taken seriously enough. The Social Democrats even question the value of this board of economic advisors.

Germany still has the luxury of a strong economy. But it is important that politicians address these issues instead of continuing with expediency. Other European countries will have to follow the same path to avoid economic collapse, but it will be more painful for them because they are already weaker.

The more time is wasted, the more painful this process will be.

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