Report
Should Germany apply the same remedies to the economy as in the early 2000s?
In the early 2000s, the German economy regained its competitiveness through a significant slowdown in wages and corporate tax cuts, while a temporarily high fiscal deficit was accepted. Today, the policies pursued so far in Germany have been very different: a sharp rise in wages (and unit labour costs in the absence of productivity gains) and a return to fiscal austerity. Germany is suffering from corporate underinvestment and a loss of cost competitiveness, against a backdrop of weak global trade in goods. Stimulating domestic demand without correcting underinvestment and the loss of competitiveness would be an ineffective headlong rush in the medium term. The solution for Germany is to regain its cost competitiveness and accept high fiscal deficits to finance public investment grants, i.e. to opt for an economic policy similar to that conducted in the early 2000s.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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