ECB’s Nagel: ‘German Economy Will Slowly Pick up Speed Again’

24 September 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel on Tuesday said that the transitory nature of some of the reasons for Germany's weak growth meant that the economy would slowly recover.

Speaking in Frankfurt to representatives of family businesses operating in the state of Hesse, Nagel, who heads the German Bundesbank, said, according to a text provided, ‘What is certain is that some of these factors [weakening growth in Germany] are only temporary. We therefore assume that the German economy will slowly pick up speed again.’

The main factors behind Germany's weak growth in recent years were the energy crisis, weak foreign demand and high inflation, he said.

‘The consequences of high inflation have depressed economic activity’, he said. ‘Many consumers have held back on spending. In addition, the tight monetary policy is dampening the economy.’

The German economy also suffered from a lack of investment, which was a result of the poor macroeconomic environment, according to a study conducted by the German Federal Ministry of Economics and Technology, he said.

High energy and wage costs, a shortage of skilled workers, uncertainty about regulation and a heavy tax and levy burden were additional factors that discouraged investments, he said.

Economic policy could mitigate the obstacles to investment by focusing on energy and climate policy, bureaucratic burdens and the labor market, he said.

‘[A] critical review of economic policy priorities is probably inevitable’, he said. ‘And that will remain on the agenda even if the debt brake is reformed. The Bundesbank considers a reform to be justifiable if it continues to guarantee solid public finances. And we have put forward stability-oriented reform proposals.’

The capital markets union would contribute to improving investment on a European perspective, he said.

‘Too often, companies come up against internal European borders when looking for financing’, he said. ‘An integrated pan-European capital market could provide European companies with more financial resources for necessary private investments.’