Germany's economy has recently seen losses with the last quarters showing a GDP drop of 0.1%. Projections for the current quarter also indicate a decrease putting the country into recession. Economists globally have urged Germany to increase government spending in order to avoid the looming recession. With Britain leaving the EU next month without much decided, the EU depends on Germany's economy's progress now more than ever before. However, the way the stimulus package is designed, it may take a while to kick in. Some economists believe that if action is not taken right away, it may be too late to avoid the pending disaster, making the stimulus package ineffective. With early elections around the corner, its clear to see Merkel's government is hesitant to implement any unpopular policies, even if they may save the European economy. Only time will tell if the German government acted smart and fast enough.
https://www.wsj.com/articles/germanys-small-steps-into-stimulus-are-unlikely-to-meet-economists-hopes-11567346410
Most countries are in debt, however in the article it states how economists are encouraging Germany to spend more money. Although government is a large contribution to a country's GDP, I find it intriguing that even with the concern of a recession looming, economists are continuing to encourage more spending. It seems that there are many possible paths in order to "fix" the looming recession, however economists are unsure how positive of an impact it will have. I'm curious as to how Germany will go about raising their GDP.
ReplyDeleteDo you think Germany will run into spending trouble if it continues to offer a negative interest rate on several of its government securities? This will likely cause a decrease on inflow of cash from bonds and could have a long term effect on available spending.
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