German stimulus

Germany's planned €50 billion fiscal boost is insufficient, considering that Germany is Europe's largest economy, writes the Financial Times.

Financial Times

With the global recession deepening and the banks still too paralysed to transmit the benefit of radical monetary loosening, the need for a co-ordinated fiscal stimulus has been obvious for some time. Except, that is, to Germany, whose fiscal orthodoxy has been so rigorous as to seem to some critics to amount to a smokescreen for mercantilism. …

But the coalition government of Angela Merkel is now changing its tune. This is in (belated) response to the depth of the crisis, and may be to criticism that Germany has been looking purely to its national interest by relying on a series of fiscal boosts in partner countries to support its exports, even though it is still running a budget surplus. ...

The coalition is putting the final touches to a €50bn ($67bn) fiscal boost. Spread over two years, this amounts to barely 0.5 per cent of national output. That is an insufficient response from Europe’s largest (and most solvent) economy, even if it is a lot better than November’s paltry €12bn package, inflated to €32bn by rolling up already assigned spending. But it is no less welcome for all that. …