May 10, 2024 Europa

German public investments too low

Debt brake is increasingly being called into question

Public investment in Germany lags well behind other countries

Sources: European Commission, DWS Investment GmbH as of November 2023

Both of these concepts are currently the subject of much debate as the lack of public investment means urgently needed measures to secure Germany's future as a business location are not being taken. The calls for change are coming even from within the governing coalition. The SPD and the Greens want to fundamentally rethink the debt brake given the large number of pressing issues that government must tackle.[1] The FDP, however, fundamentally rejects the idea of dropping the debt brake. Polls show a small majority of voters, 54%, take the same view and want the debt brake retained. But polls also show that four out of ten Germans would like to see it relaxed.[2] The OECD certainly sees it that way. It suggests that the German government should take measures to stimulate economic growth, including a reform of the debt brake to create room for net investment.[3]

Martin Moryson, Chief Economist Europe at DWS, is sympathetic to criticism of the debt brake. In his view, though a debt brake might seem wise given Germany's aging population and the need to avoid burdening future generations with a mountain of debt, "the design of the debt brake is turning out to be a brake on growth." The government needs to ensure that future generations continue to have access to sufficient capital, and the brake on investment therefore needs to be eased.

Subscribe to our CIO Daily

Get up to speed with markets – subscribe to the CIO Daily, your morning briefing to help guide informed investment decisions

I hereby subscribe to the newsletters of DWS International GmbH with market and economic information and / or information or offers about investment opportunities and agree to the data protection policy. I can unsubscribe from the newsletters at any time.
Subscribe

Read more

Discover more

1. Neuer Haushalt, alte Debatte, tagesschau.de as of 5/3/24

2. Asylpolitik wichtigstes Thema bei Europawahl, tagesschau.de as of 5/2/24

3. OECD für Reform der Schuldenbremse, tagesschau.de as of 5/2/24

CIO View