The President of the Ifo Institute in Munich has launched a scathing critique of Chancellor Friedrich Merz’s government, accusing them of a paralyzing hesitancy in addressing critical economic and geopolitical challenges. In an interview with “Süddeutsche Zeitung”, Clemens Fuest expressed deep concern over the administration’s apparent tendency to defer difficult decisions, warning of potentially devastating long-term consequences for Germany.
Fuest asserted that Chancellor Merz has so far actively avoided confronting the substantial hurdles facing the German economy, relying heavily on financial infusions as a perceived solution. “Simply showering everything with money doesn’t require much courage” he stated, implying a lack of bold, structural reform. He criticized the government’s approach as avoiding fundamental problems, arguing that government policy frequently exacerbates issues for the private sector. He specifically cited contentious pension policies and the looming prospect of tax and levy increases as evidence of this detrimental impact.
The economist’s starkest warning was a prediction of potential prolonged stagnation for Germany if current trends persist. “There is no guarantee of a return to growth” he cautioned, highlighting a palpable anxiety regarding the nation’s economic trajectory.
Beyond economic concerns, Fuest forcefully advocated for a radical shift in Germany’s strategic mindset in light of the escalating threat of war. He proposed what he termed “a war economy” model, emphasizing the necessity of swift and decisive action. This, he suggests, demands a rapid ramp-up of production for previously shunned goods and a fundamental re-evaluation of priorities. He acknowledged Germany’s historical pacifism but countered that “Pacifism can only be afforded if one is not attacked”. This necessitated significant investment in defense, he argued, inevitably shrinking the overall “economic pie.
Fuest further lamented what he described as a deeply ingrained expectation amongst German citizens that the state will insulate them from hardship – a belief he deems unsustainable. He specifically pointed to the unrealistic promises made during the last election campaign, including measures like enhanced parental benefits and guarantees for pensioners, labeling them “a denial of reality”. This legacy of promised largesse, he suggests, creates a perilous disconnect from the difficult economic realities now facing Germany and hinders the urgent need for pragmatic, albeit potentially unpopular, policy changes.
