Clemens Fuest: “It would be extremely economically risky if populist parties came into government” | EUROtoday

The President of the Munich Ifo Institute, Clemens Fuest, has criticized the federal authorities below Chancellor Friedrich Merz for its financial coverage. “Unfortunately, everything that is difficult is put on the back burner. That won’t work out in the long run,” stated Fuest to the “Süddeutsche Zeitung”. The Chancellor is avoiding the most important challenges in financial coverage.

The authorities is attempting to resolve many issues with monetary means. “It doesn’t take a lot of courage to throw money at everything,” stated Fuest. Politics is definitely exacerbating the issues for the non-public sector reasonably than fixing them. He cited pension coverage and its doable penalties as examples.

“In the medium term there will probably be increases in taxes and contributions because pension increases, for example, can no longer be financed otherwise.” This results in investments declining even additional and the “flight away from Germany” rising. “In the end, Germany could enter a phase of permanent stagnation. There is no guarantee of a return to growth.”

In the interview, Fuest additionally warned of the risks of right-wing and left-wing populism. The change within the social gathering panorama poses “significant risks”. Research reveals that populist politics result in financial decline. “The AfD promises to increase the pension to 70 percent. But no one knows how this will be financed.”

Germany lives from financial relations overseas and wishes immigration into the labor market. That’s why it might be “counterproductive” if worldwide organizations such because the EU or migration had been “blamed for the problems,” stated the economist.

“At the same time, I also see the dangers of left-wing populism,” added Fuest. “A lot is being promised here too: Rich people should be taxed extra in order to finance big promises. Rich people who don’t exist in numbers and who, on top of that, will quickly leave the country. It would be extremely economically risky if populist parties came to government.”

“We need something like a war economy”

He is at present anticipating that “the moderate parties will defend their majorities”. However, these wouldn’t at present resolve the issues and wouldn’t lead the nation again to progress. For 2026, he expects a short-term financial revival on account of larger nationwide debt – however this might be weak.

With regard to the menace from Russia, Fuest stated: “We live in times of impending war, so we need something like a war economy in Germany.” Industry should “produce those things that have long been undesirable,” stated the economist. “We have to rethink things, and quickly.” Germany is a pacifist nation. “But you can only afford pacifism if you are not attacked.”