Germany: Green stimulus to the rescue? – ING

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The call for fiscal stimulus in Germany has never been louder and this week will show whether the eurozone country, with the deepest pockets, finally plans to empty them, says Carsten Brzeski – Chief Economist at ING Germany.

Key Quotes:

“According to a report in the German newspaper “Welt am Sonntag”, the government is looking for a EUR40bn package until 2023. This package could include higher subsidies for electric cars, subsidies for climate-friendly real estate renovations and investments in rail. Whether or not the package will also include a CO2 tax remains unclear.”
 
“Given comments over recent days, the financing of such a climate package could be done ‘off-budget’ or through some so-called Special Purpose Vehicles. Even the option of special green government bonds has been mentioned. The advantage of these financing methods is that they wouldn’t collide with the constitutional debt brake and would ‘only’ be subject to European fiscal surveillance under the Stability Pact.”
 
“This is not the place to assess the German government’s strategy to tackle climate change. Needless to say that any such strategy should be all-encompassing and preferably coordinated at the European level. However, just looking at it from a eurozone growth perspective, Friday 20 September could finally show that Germans can do fiscal stimulus. Green stimulus. It would not be enough to stop the current slide of the economy towards the recessionary territory, but it could be an important cornerstone in Germany’s recovery and its quest for a new economic model.”

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