“The German economy is stuck in stagnation,” is how Heiner Herkenhoff, CEO of the Association of German Banks, described the bleak picture painted by the annual economic report. He highlighted the fact that by the end of 2024, Germany’s overall economic output will be only slightly higher than it was at the end of 2019, as being particularly serious. “Half a decade of stagnation puts a significant strain on the economic, political and social foundations of the country,” warned Heiner Herkenhoff.
In this situation, individual economic policy measures, such as merely increasing public debt or subsidising individual sectors of the economy, would no longer help. He went on to say, “What we urgently need is a comprehensive and major boost that creates better overall framework conditions for economic activities and investment in Germany”.
He also welcomed the government’s willingness to discuss the possibility of providing tax cuts for businesses. Herkenhoff said, “These tax cuts must now come quickly and be substantial”. The same applies to removing bureaucratic hurdles and lowering regulatory costs. A change of mindset was required to overcome the bureaucracy that has since become the main barrier to growth.
CEO Herkenhoff said, “Banks in Germany are stable and well positioned – despite the difficult economic environment. Weak lending growth in Germany is clearly being driven by the demand side. Our banks are stand ready to finance additional investment in Germany”. And given that the amount of investment required for the green transformation will be huge, the political commitment to strengthening the capital markets in Germany must now be implemented as a matter of urgency.
