Germany needs reform and investment to overcome recession, says IMF Europe head

BERLIN (Reuters) – Germany needs both structural reforms and more investment in public infrastructure to overcome recession, the European head of the International Monetary Fund said in an interview with Sueddeutsche Zeitung.

“Without a functioning infrastructure, there can be no productive economy,” Alred Kammer told the paper in an interview published on Tuesday.

In order to mobilize more money, it would also make sense to revise the current credit rules, Kammer said. “We at the IMF already calculated this some time ago: The debt brake can be relaxed – and the government debt ratio will still continue to fall.”

Finance Minister Christian Lindner has insisted on sticking with Germany’s debt brake, which restricts the budget deficit to 0.35% of gross domestic product, despite a forecast second year of recession and a sluggish growth outlook.

Economy Minister Robert Habeck, on the other hand, recently proposed a multibillion-euro fund to stimulate investment and remedy growth.

Asked whether Lindner or Habeck was right in the German government’s fundamental dispute, Kammer responded that “a lot would be gained if politicians clearly communicated what their strategy is in the medium and long term”.

This was particularly true for the climate-friendly restructuring of the country. “Companies will only invest if they know what is going to happen in the next ten to 15 years,” Kammer said.