Veronika Grimm: Die Regierung verbaut Deutschlands Zukunft

After the summer break, Chancellor has once more made clear: economic growth should be the top priority – rightly so. However, there is a significant gap between the stated ambition and the visible reform policy. The state finances are running out of control and sustainable growth is not in sight. By 2029, according to the federal government's financial plan, federal revenues will no longer be sufficient to finance social expenses, defense, and interest payments alone.

The reforms currently under discussion are expected to ease the rise in state spending somewhat, but they are not enough to curb the spending dynamics. Some of the proposed reforms may also be growth-restrictive, as social contributions will initially rise, as will the tax burden for high earners and partnership companies. Particularly, it must not be mistaken to conflate consolidation with growth policy.

Rising state spending does not automatically increase productive potential. Therefore, if growth is declared as the top priority, one must answer where this growth is to come from. Growth comes from increased labor volume, investments in the capital stock, and technological progress. However, an increased labor volume can only limit the consequences of demographic change, not reverse it.

Investments in the capital stock – which are currently even declining – will not generate sufficient growth momentum on their own. What is crucial is technological progress. However, here too, a reform agenda is currently missing.