Jens Südekum, the economic adviser to Federal Finance Minister Lars Klingbeil (SPD), strongly disagrees with demands for a comprehensive government austerity program in response to the dramatic increase in state bond interest rates. In an interview with the “Frankfurter Allgemeine Zeitung”, Südekum stated that demanding strict austerity in Germany as a reaction to an international crisis fundamentally misinterprets the origin of the interest rate hike and is based on a generalized view.
He argues that the rise in rates is a consequence of global uncertainties-particularly citing “Trump’s Iran War”-and is not linked to German fiscal policy, the Düsseldorf-based economist explained. Furthermore, crises, especially in the Middle East, fuel concerns about higher energy prices and inflation, a reaction that has caused bond prices to fall “far more sharply” in other countries than domestically.
Südekum asserts that the “only correct response” to the crisis is to continue increasing investment in infrastructure and climate protection. He emphasized the need to move away from costly energy imports and toward renewables, claiming this strategy creates growth momentum and secures the nation’s debt sustainability. Additionally, he noted that the government is already pursuing a determined path toward consolidation, citing the finance minister’s efforts to close a €34 billion gap in the 2027 budget.
Prior to this, Clemens Fuest, President of the Ifo Institute, had called for Germany to present a convincing, multi-year strategy to lower state spending and strengthen economic growth amidst high interest rates. Monika Schnitzer, chair of the Economic Expert Council, supported Fuest. She stressed the vital importance of consolidating expenditures in Germany and bringing defense spending within the rules governing the debt.
However, Schnitzer expressed reservations regarding the political will for such cuts. She warned that if policy measures, such as the planned removal of the retirement age of 63, fail, it could be viewed as an “admission of poverty.” She cautioned that if the government were forced to rein back in its pension package, the viability of other reform projects would be heavily jeopardized.
Veronika Grimm, a supervisory board member of Siemens Energy and also a member of the so-called Economic Expert Council, offers a broader criticism of the ruling government. She believes that making some cuts would be ineffective, as other ministries would immediately find use for those funds. Without an expenditure ceiling, she states that containing the deficit is impossible. Given that the debt brake mechanism is currently bypassed, she proposes establishing a firm ceiling on the public debt ratio. She pointed out that the country’s debt ratio has now passed 52 percent, which she considers far too high, noting that it traditionally remained below 45 percent.
