ECB’s Nagel: German Economy Regaining Footing, but Needs More Investment

1 July 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Monday said that the German economy was showing signs of recovery and called for policy measures to increase investment in the country.

Speaking at the Frankfurt Euro Finance Summit, Nagel, who heads the German Bundesbank, said, according to a text of his speech, ‘I am convinced that if Germany is to embark on a higher growth path, there is no way around more investments. Not in all, but in quite a few places, politicians can remove hurdles.’

‘There are rays of hope in the economy and the German economy is slowly regaining its footing’, he said.

Germany was behind other economies in terms of growth and competitiveness of location, he acknowledged, but it was possible to overcome those challenges though investments.

‘Investments are therefore crucial to meet the challenges of the green transformation and to seize the opportunities of new digital technologies’, he said. ‘Investments in equipment in particular transfer technical progress into production structures. So they also help to increase productivity and lead the economy on a higher growth path.’

According to research conducted by the Bundesbank, companies reduced their investments in Germany in 2023 due to the poor macroeconomic environment and to structural problems, he said.

‘These include, above all, high wage and energy costs as well as the shortage of skilled workers. In addition, uncertainty about the regulatory framework and a high tax burden inhibit the propensity to invest’, he said.

‘Low government subsidies or inadequate infrastructure, on the other hand, were cited less frequently as barriers to investment compared to the other problems', he said.

Politicians could make Germany more attractive to investment by addressing those issues, especially in regard to energy policy, bureaucratic burdens and the labour market, he said.