Government actions are shockingly unethical. - "The actions of the government are alarmingly questionable"
The German federal government has unveiled plans for a comprehensive economic and social overhaul, dubbed the "Herbst der Reformen" (Autumn of Reforms). The aim is to improve the financial situation and modernize the economy, with key reforms on the table.
Michael Hüther, the director of the employer-friendly Institute of the German Economy Cologne (IW) since 2004, has been a vocal advocate for these changes. However, he finds the current use of funds a scandal, as decades of neglect need to be caught up on.
The potential for savings lies primarily in the area of work and social affairs, such as pension reform and reducing working hours. Mr. Hüther, who was a strong advocate for the debt brake when it was introduced, now advocates for a reform of the debt brake to finance the transformation of the economy and invest in infrastructure.
Finance Minister Lars Klingbeil plans to accumulate around 850 billion euros in new debt by 2029. This amount, while half of the current debt, has raised concerns among financial experts like Mr. Hüther, who fears that the money might ultimately be spent on election bribes rather than investments.
The federal government's inability to effectively address the problems of the debt brake for a long time has been a point of contention. Under Helmut Schmidt, defense expenses were regularly at least 3 percent of GDP and were not financed with debt. Defense expenses, according to Mr. Hüther, must be borne from the tax budget, not from credit financing.
Consumptive expenses must always be financed from the tax budget, while long-term investments that benefit several generations should be sensibly financed by credit. The government needs to focus on naming concrete projects to make politics more understandable.
The "Autumn of Reforms" includes adjusting income tax by raising the threshold for the top tax rate to relieve small and middle incomes. However, debates continue about raising the top tax rate for the highest earners. Another focus is on relieving cities of growing social costs through better financing cooperation between federal, state, and local governments.
The government's efforts to modernize infrastructure and address budget deficits also include promoting de-bureaucratization and digitalization across public administration. The budget for 2025 has been approved, but little progress has been made so far in the announced "Autumn of Reforms".
The current situation is a result of a poorly prepared Union and an SPD finance ministry that is cheating, according to Mr. Hüther. He believes the financing paths of the state should orient themselves towards public tasks.
The fear of misuse of funds has been partly justified, as the government's handling of funds has been a cause for concern for experts like Mr. Hüther. As the "Autumn of Reforms" unfolds, the focus remains on implementing effective changes to improve Germany's financial situation and modernize its economy.
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