Coalition will swiftly turn economy around #NewsGerman

German Finance Minister Lars Klingbeil has said that initial plans by the new coalition government – including an ‘investment booster’ – will bring about a swift revival of his country’s economy.

An agenda is to be adopted by the summer that clearly outlines the economic policy priorities at the coalition committee of the conservatives and Social Democrats (SPD) next week, Klingbeil said on the sidelines of a meeting of finance ministers and central bank heads of the Group of Seven (G7) leading economies in the Canadian mountain resort of Banff.

The most important instrument for him, he said, is an “investment booster” that will allow companies to write off up to 30% of investments over three years. This, he said, will lead to massive private investments alongside public spending on infrastructure.

“I am sure that companies will also immediately get involved, that hesitation about investing will be abandoned, and that we will then also see progress in Germany,” said Klingbeil, who is also Germany’s vice chancellor.

Bundesbank chief urges rapid reform action

The head of the German central bank also hopes that the new government will implement its structural programme rapidly, noting that he does not expect a noticeable upswing in the Germany economy this year. “For 2025, we are expecting weak economic growth, which could be termed stagnation,” Bundesbank President Joachim Nagel said.

Calling for rapid implementation of the government’s plans, Nagel said: “Investment in infrastructure and technologies of the future are the key here to opening the door to more growth.”

The new government has outlined plans for up to €500 billion ($565 billion) in infrastructure spending.

Nagel was more positive on inflation. “We will reach our inflation target of 2% in the eurozone this year,” he said, terming this good news for the population and for business.

He said he was not concerned that the government’s economic programme would be inflationary, provided that it was focused on investment. It also contained elements that would reduce prices, for example on energy, he noted.

The programme would initially affect a relatively weak economy, and a boost could then possibly be seen in 2026, Nagel said.

Nagel predicted anticipatory effects from US tariff policy would show in the first quarter. “Then the following quarters will turn out rather more weakly,” he said.

Klingbeil sees path to compromise in tariff dispute

Klingbeil expressed confidence after talks among the G7 ministers that a joint solution could be reached in the international tariff dispute with the United States. “We need movement in the negotiations now,” he said, referring to talks between the European Commission and the US side.