The Germans gained an additional trillion of euro practically for free thanks to the positive reaction of bond markets to their “historical” project regarding planned expenses – said the head of the supervisory board of Deutsche Bank Alexander Wymnderts.
The Bundestag adopted a law by CDU/CSU i SPD reforming “debt brake” recorded in the Constitution, prohibiting increasing budget deficit above 0.35 percent GDP. The introduced changes provide that expenses for the army, civil defense, services and cyber securityexceeding 1 percent GDP will not be subject to budget restrictions, and it will be possible to take out loans to finance them.
The “financial package” also provides for the creation of a special fund for the reconstruction of infrastructure and a climate protection of EUR 500 billion. The authorities of German union countries (Lands) also received a larger field of maneuver in financial policy.
The constitution was then approved by the Bundesrat (Federation Council).
The changes are aimed at stimulating the largest European economy, modernizing outdated infrastructure and rebuilding defense skills. Berlin had to take action, among others, in connection with the lack of certainty about the president's policy USA Donald Trump.
Markets have positively adopted this change, which, according to economists quoted by Bloomberg, should lead to an increase in economic growth throughout euro area.
“The market has clearly supported the expenditure package, which overcame the last legislative obstacle,” said the head of the supervisory board of Deutsche Bank quoted by Bloomberg. – You can even say that we got a trillion euro without additional costs – he added.
Risk of incorrect investments
Inventions noticed that a sudden surge of money carries the risk of incorrect investments after years of underfunding defense and chaotic public procurement systems. – Will there be poorly issued investments? Absolutely yes, but we don't have an alternative – he said.
He noted that Germany They have to work on structural reforms so that the debt -driven growth becomes permanent.
– We need to reduce regulations, tax reform, and labor law reform. So there are a lot of things that still have to happen so that these huge investments have a full effect, ”said inventies.
“We don't have time to waste it,” he concluded.
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