Thursday , February 25 2021
Home / Project Syndicate / The Inevitability of German Stimulus

The Inevitability of German Stimulus

Summary:
The transition to new German leadership after 16 years under Chancellor Angela Merkel will not change the country's core political priorities vis-à-vis Europe. Preserving the eurozone will remain paramount, even if it means suspending Germany's traditional opposition to fiscal stimulus and deficits. STANFORD – Armin Laschet’s victory in the election to lead Germany’s Christian Democratic Union (CDU) puts him in pole position to succeed Chancellor Angela Merkel later this year. But the leadership contest was more about differences in tone and style than substance. From a policy standpoint, it makes no difference. Merkel Minus Angela Shan Yuqi/Xinhua via Getty Images

Topics:
Melvyn Krauss considers the following as important:

This could be interesting, too:

FT Alphaville writes Michael Bolton wants you to break up with your brokerage

Swee Kheng Khor writes Three Vaccine Assumptions for 2021

Jean Pisani-Ferry writes Central Banking’s Brave New World

Christian Edlagan, Maria Monroe writes Expert Focus: Diversifying the economics profession

The transition to new German leadership after 16 years under Chancellor Angela Merkel will not change the country's core political priorities vis-à-vis Europe. Preserving the eurozone will remain paramount, even if it means suspending Germany's traditional opposition to fiscal stimulus and deficits.

STANFORD – Armin Laschet’s victory in the election to lead Germany’s Christian Democratic Union (CDU) puts him in pole position to succeed Chancellor Angela Merkel later this year. But the leadership contest was more about differences in tone and style than substance. From a policy standpoint, it makes no difference.

Currently the minister-president of North Rhine-Westphalia, Germany’s most populous state, Laschet will maintain Merkel’s policies to keep the eurozone together. His competitor for the post, Friedrich Merz, would have done the same, notwithstanding his more conservative temperament. Continuity will be the watchword of the post-Merkel period.

During Merkel’s 16-year tenure, holding the euro together has become a key political imperative for Germany. The response to the COVID-19 pandemic has shown that Germany’s leadership will do almost anything to prevent Italy from leaving the single currency. Not only has Germany agreed to a €750 billion ($910 billion) EU recovery fund and the issuance of joint debt (through a quasi-Eurobond); it also may agree to pursue additional fiscal stimulus, even if it has to again suspend its “black zero” rule against budget deficits.

Leave a Reply

Your email address will not be published. Required fields are marked *