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Investing.com -- Today, at the Berlin School of Economics, Humboldt University of Berlin, the European Central Bank’s Joachim Nagel discussed Germany’s current economic situation, highlighting the country’s reduced growth potential now at just 0.4% per year. This is a decrease of 1 percentage point from the previous decade, and over 1 percentage point lower than the rest of the EU without Germany.
Nagel, serving as the President of the Bundesbank and ECB Council member, emphasized that European monetary policy is his main duty. He noted the significant progress made towards price stability, acknowledging the ECB Council’s decision to cut key interest rates by 25 basis points at its March meeting.
Nagel also spoke on his role in advising the federal government on matters of monetary policy importance. He expressed that it’s crucial to tackle future challenges while keeping public finances solid, both in Germany and Europe. He stressed that simply having more room for borrowing would not solve Germany’s weak growth problem, indicating that the causes are complex and require a comprehensive set of measures.
The ECB official outlined twelve key points he believes should be addressed by economic policy to put Germany on a structurally higher growth path. These points relate to three major areas: work, energy, and corporate dynamics.
In terms of work, Nagel suggested increasing the working hours of part-time workers, promoting labor market-oriented migration, improving work incentives for citizens’ allowance recipients, and strengthening employment incentives for older people.
For energy, he recommended applying adequate CO2 pricing evenly to all sectors, creating a reliable and coherent framework for the energy transition, eliminating climate-damaging subsidies, and integrating European energy markets more closely.
To boost corporate dynamics, Nagel proposed reducing bureaucracy, facilitating business start-ups and strengthening innovation, reducing tax burdens for companies, and simplifying and accelerating administrative processes.
Nagel concluded by stressing the importance of smart, consistent, and reliable economic policy in addressing political and economic challenges. He emphasized the potential of Germany’s location at the heart of Europe and the need for closer cooperation within Europe, particularly in terms of defense and economic collaboration. He also highlighted the importance of completing the European banking union and creating the long-awaited capital markets union.
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