German Finance Minister Christian Lindner wants to push through another round of reforms to get Germany back on track. Photo: REUTERS
Germany has become the “tired” “man” of Europe as years of crisis have eroded the country's competitiveness, Finance Minister Christian Lindner admitted.
The eurozone's largest economy needs serious reforms to regain its leadership, – said the head of the Free Democratic Party (FDP) told the audience at the World Economic Forum in Davos.
“I know what some of you are thinking: Germany is probably a sick person. Germany is not a sick person,” he said, speaking days after official data showed the economy contracted 0.3% last year.
“After a very successful period since 2012 and these years of crisis, Germany is tired. Man, after a short night and expectations of low economic growth, this is kind of a wake-up call. And now we've had a good cup of coffee, and that means structural reforms, and then we'll continue to make economic gains.”
At the turn of the century, the German economy was considered the sick man of Europe as it struggled with low growth and unemployment. which peaked at over 11% in the early 2000s.
A major package of reforms to make the labor market more flexible has unlocked the economy's potential. Unemployment has been below 5% for more than a decade.
However, the pandemic and the war in Ukraine have challenged Germany's economic model, cutting off cheap energy from Russia and undermining the economic strength of China, which has become a key export market.
Now Mr Lindner wants another package of reforms to get Germany back on track.
“To finance all our transition needs, fight poverty and prepare for an aging society, there is one solution. Given the demographics, given the investment needs, I think we have to increase our productivity,” he said.
“That's why I advocate for structural reforms in the labor market, in technology, for reducing the red tape and becoming more competitive when it comes to corporate taxation.
“We had to solve the debt and deficit problems, which made me the loneliest minister in the cabinet, but we managed to solve our debt problems and now we need to strengthen the supply.”
When asked how Europe must prepare for the likelihood of Donald Trump winning the US presidential election this year, Mr Lindner said creating a more competitive European economy and increasing defense spending were critical.
“Doing our homework – the best preparation for a possible second term for Donald Trump. This includes our ability to defend ourselves,” he said.
“Being an attractive partner at eye level when it comes to the economic situation, when it comes to fair burden sharing under the NATO roof, is the best thing we can do to maintain a good partnership with the US. Then it doesn’t matter which administration—if we are attractive, if we don’t have to ask others because we have the capabilities ourselves, [that’s] the best way to cooperate for both possible outcomes of the US election.”
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