Economic Forecaster Assesses Germany’s Debt Capacity Amidst New Borrowing
Jens Südekum, an economics professor and advisor to Finance Minister Lars Klingbeil, has expressed confidence in Germany’s ability to manage the government’s significant increase in debt. In a recent interview with the German weekly “Zeit” Südekum stated he is not overly concerned about the country’s debt ratio, predicting Germany will be in a stronger financial position than other major industrialized nations by 2040.
The current coalition government has budgeted for approximately 850 billion euros in new debt over the current legislative period. Südekum anticipates that this borrowing will stimulate economic growth, thereby mitigating the rise in the debt-to-GDP ratio.
“Currently, the estimated growth potential of the German economy is around 0.5 percent per year. I believe we can increase it to 1.4 or 1.5 percent with determined growth policies” explained Südekum, who teaches economics in Düsseldorf.
He further noted that higher economic growth will ease the burden of debt servicing. Increased economic activity translates to higher tax revenues, providing greater resources for debt interest payments.
