Economic Policy Agenda 2021–2025

The starting position of Germany’s first post-Merkel government is not an easy one. Even before the coronavirus crisis, there were considerable challenges ahead: an aging population, technological change, especially digitalization, and global warming; moreover, there is the shift in economic heft toward Asia and the growing influence of China. Some of these challenges have been exacerbated by the pandemic. What should the next federal government’s economic and financial policies focus on?

Ort der Entscheidung: der Deutsche Bundestag
Ort der Entscheidung: der Deutsche Bundestag

Based on their own scientific findings, ifo experts have jointly developed an economic policy agenda for the new legislative period. This agenda is linked to the fundamental and long-term goals of the social market economy – securing prosperity, equality of opportunity and inclusion, sustainability, and economic stability.

The conditions for labor force participation and investment must be improved. More must be done for the education system to boost productivity and increase equality of opportunity. In climate policy, the focus must be on employing the carbon price. Fiscal policy should promote economic recovery but maintain debt rules. At the European and international level, Germany should counter increasing protectionism.

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ifo Podcast: Public Finances after Corona

After many years without new debt, the Corona crisis has caused debt levels to rise sharply again. This new debt and rising consumer prices are fueling concerns about growing inflation. Are these concerns justified? How can the national debt be brought back to a reasonable level? Are tax increases necessary?

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Welcome and introduction

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Panel discussion ifo Annual Meeting 2021

Statements on the Exploratory Paper

Germany’s first traffic light coalition could become a reality. The SPD, Greens, and FDP want to conduct coalition negotiations. The three possible governing parties have already laid down some key points of their cooperation in an exploratory paper. However, there are still some bridges to build. For example, the SPD and the Greens had argued for financial redistribution during the election campaign. The FDP rejects the idea of offsetting this with tax increases for the wealthy. Details also still need to be clarified in the coalition agreement on topics as diverse as rent control, investment, climate policy, and foreign policy. Experts from the ifo Institute comment on various proposals.

 

The plan to promote public and private investment in digitalization and climate action is a good one. It is important not to simply take on debt to finance it, but also to review existing spending. The statements on statutory pension insurance are less convincing.
The planned abolition of the EEG levy is to be welcomed. By increasing the expansion of renewable energy, Germany can make itself independent of global markets and prices for fossil fuels in the medium term.