Dispute over growth package
Habeck criticizes the Union's “voodoo financial policy”.
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The economy is slowing down, Economics Minister Habeck can only present mini-growth of 0.2 percent for the current year in the Bundestag. In the dispute over ways out of the misery, the Greens are reproaching the Union for blocking the Growth Opportunities Act.
In a government statement on the annual economic report, Federal Economics Minister Robert Habeck called on the Union to end the blockade on the growth package. “Listen to the business associations and finally give the Growth Opportunities Act the green light,” he said. Even after a meeting of the mediation committee of the Federal Council and the Bundestag, it is unclear whether the Union will agree to the growth package in the Bundesrat on March 22nd. The votes of the Union countries are necessary for this. The Union is making its approval conditional on the cancellation of agricultural diesel subsidies in another law already passed by the Bundestag.
Habeck criticized that the Union's proposals for more growth would result in tax losses of 45 to 50 billion euros in the budget – but the Union has no concepts for counter-financing and at the same time wants to comply with the debt brake. This is “voodoo financial policy”.
Looking at the annual economic report, Habeck also sees signs of hope despite the significantly lower growth forecasts. “The energy supply is secure,” said the Green politician in a government statement in the Bundestag. The gas storage facilities are full even in winter. Gas prices are roughly back to the level before Russia's attack on Ukraine almost two years ago. In Habeck's opinion, the situation is likely to get even better in 2025. “Gas prices will go down.” That means more production in the energy-intensive industry again.
In addition, inflation in Germany will approach the two percent mark by the end of 2024, which is considered optimal for the economy, Habeck added. “With falling inflation, the prospects of interest rate cuts this year have become realistic.” It is unclear when and to what extent this will happen. But there will be more incentives for investments again. Income growth is now above inflation, he emphasized. “With the increase in wages and salaries, the prospect of more consumption being restored is back,” said the Economics Minister.
“Really small, pitiful number”
Habeck warned that the labor gap in Germany is already “so big that the work that is there cannot be done in an economy that is virtually stagnating.” The problem of potential growth will become greater in the next few years. This labor gap is “the main structural threat to prosperity and growth in Germany in the future,” said the Economics Minister. “And it needs to be closed.”
In its annual economic report, the government significantly lowered its growth forecast for this year. Habeck spoke of “only the really small, pitiful figure of 0.2 percent growth, basically stagnation of the economy.” As justification, Habeck once again referred to weak world trade, which is putting a strain on the German economy, which has strong exports. He cited the shortage of skilled workers as the biggest structural problem.
In order to stimulate the economy, investments must be “spent quickly,” demanded Habeck: “The money that is there has to work quickly and has to be spent quickly.” The government must set examples “that it wants this money to be spent quickly, that the approval procedures become faster, that the construction procedures are carried out more quickly and cheaply”.
CSU regional group leader Alexander Dobrindt responded to Habeck's government statement on behalf of the Union. “Germany is at the absolute bottom of the pack in Europe, and you bear a significant share of responsibility for that, Mr. Minister,” said. “This is not an annual economic report, but rather this traffic light government’s declaration of economic bankruptcy,” said Dobrindt. “The way we interact with one another at traffic lights, including when it comes to questions of economic policy, moves between brawling and a loss of reality. But that's not how you fight a recession, that's how you create a depression in the country.”
“All of our neighbors have the same crises, but greater growth,” explained Dobrindt. “It is your responsibility and not the world crisis.” With a view to the controversial growth package, the CSU politician explained: “With your Growth Opportunities Act you want 1.4 billion euros in relief. At the same time, you want to involve agriculture in this refinancing, this relief with 500 million euros and put a burden on it. That is an injustice, that we cannot accept.”
