You are the most important economic policy adviser to the federal government. So also the government that is just emerging. But the council of experts for assessing macroeconomic developments – this is the official name – is currently in an unusual situation. The economic modes (this is the common abbreviation) are only four. The position of the recently retired economist Lars P. Feld is not occupied.
Which is why this time there is no majority opinion with an attached minority vote of the committee on a sensitive point of the traffic light talks, but simply two equal positions. The SPD, the Greens and the FDP now have a choice: When it comes to the question of how to push the hotly debated transformation investments towards more climate protection and digitization, all traffic light parties can now use the advisory panel.
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The FDP will prefer to do this with Veronika Grimm and Volker Wieland. In the annual report presented on Wednesday, the two economists from Erlangen and Frankfurt am Main emphasize the “more important role of private investments” in this transformation process as well. When it comes to climate protection, they also favor the CO2 price as a steering instrument. They also defend the debt brake, which has not prevented the rise in government investment in recent years and which has proven flexible in the pandemic. The Federal Audit Office also made a plea for debt limitation on Wednesday.
Interim solution possible
But Grimm and Wieland have recognized that there is a broad demand in politics to further interpret the debt brake and to enable more credit financing in the coming years. They therefore suggest that they could envision a “temporary solution” – Chancellery Minister Helge Braun (CDU) had already discussed such a solution last winter. But this transitional arrangement must ensure that additional investments are actually being financed and that the new debts are not intended to create room for maneuver in the budget for non-investment expenditure alone.
As far as the instruments are concerned, the objections of Wieland and Grimm are rather moderate in two areas: when it comes to the higher equity base of existing public companies (such as the railways or the credit institution for reconstruction) and when creating new, legally independent investment companies that are set up outside the state.
Permanent loan financing
Council members Monika Schnitzer (University of Munich) and Achim Truger (University of Duisburg-Essen), on the other hand, advocate a more offensive approach. They are calling for permanently higher loan financing for “future-related expenditure”, for example through a large investment fund, such as the SPD, the Greens, but also the unions and even employers want. They consider continued use of the emergency clause of the debt brake to be necessary, as the state’s financial position “continues to be significantly impaired” after the pandemic. So far, the resolution in the Bundestag is that the exception rule will be used for the last time in 2022. This is also what the traffic light parties agreed on. They consider new investment companies to be less problematic than their somewhat more conservative colleagues, and therefore see no major legal hurdles.
Agreement on growth forecast
In the case of one of the most contentious issues in the traffic light negotiations, for example, there are two competing passages in the annual report of the economic wise men. But intersections are recognizable. The four professors agree on economic development. It is true that they are also lowering the growth forecast for the current year from 3.1 to 2.7 percent – which is, after all, a slightly better value than that in the autumn projection of the Ministry of Economic Affairs. By contrast, Grimm, Schnitzer, Truger and Wieland are predicting growth of 4.6 percent for 2022. This would have caught up with the economic development before the pandemic in the first quarter.
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At the press conference, however, Wieland emphasized: “The uncertainty about the coming economic development is high.” In particular because of the increasing number of pandemics – whereby the economic experts assume that a broad implementation of the 2-G rule would not harm the economy.
A piece of advice to the ECB
The economic wise men advised the European Central Bank to get out of the extremely loose monetary policy with its zero interest rate in good time. Otherwise economic development could also be jeopardized. The economic wise men recommend a “normalization strategy” that must above all pay attention to price stability – that is, a procedure with a view above all to the development of inflation.
The traffic light parties, where the deadline for submitting the reports of the negotiating working groups ended on Wednesday evening, did not come with lengthy comments on the economists’ assessments of how the planned investments and promotional measures should be financed. The incumbent Chancellor Angela Merkel received the report of the economic wise men again. Shaping the transformation towards more climate protection and digitization was also the task of her government and will now be continued by the next government. “The report comes at the right time to provide inspiration for those who are now negotiating,” said Merkel.
