ECB’s Nagel: Optimistic That Germany Will Realise We Can’t Abandon Fiscal Restraint Forever

7 July 2025

ECB’s Nagel: Optimistic That Germany Will Realise We Can’t Abandon Fiscal Restraint Forever
Joachim Nagel, president of the Deutsche Bundesbank, at the ECB International Women’s Day 2025 in Frankfurt on March 7, 2025. Photo by Adrian Petty/ECB under CC BY-NC-ND 2.0.

By David Barwick - TALLINN (Econostream) – European Central Bank Governing Council member Joachim Nagel on Monday said that it was important that Germany not lose sight of the need for sustainable fiscal developments.

During the Q&A following his speech at the Estonian central bank, Nagel, who heads the German Bundesbank, said, ‘I believe this is part of our DNA, that I’m very optimistic that everyone is understanding that at the end, we have to show again fiscal consolidation.’

The increased German government spending would lead to better economic performance, from which others would also benefit, he said.

‘And when Germany is doing better over the next years - and there are good signs [of this] - then there are positive spillovers’ for other European economies, he said.

Having attended a meeting of the new German government last week, Nagel said that his impression was that ‘there is a government that wants to change things. They want to move things, and they want to show leadership.’

The geopolitical risks, trade tensions and various other developments were creating ‘a very complicated situation’, he said, but the government was showing signs of determination to meet the challenges.

In the current context of elevated uncertainty, ‘it’s important to show some optimism and I believe we Europeans can be a litte bit more self-confident’, he said. ‘We have so many assets in Europe that I believe we should be more self-confident.’

Europe was ‘showing leadership’ in its response to American tariffs, according to Nagel.

‘Tariffs are definitely not helpful’, he said. ‘This is against all what I know from economics.’

Europe should ‘do everything what is necessary maybe to convince the other side of the Atlantic what should be done and what definitely should not be done’, he said.

He called for a 'joint European answer' to US tariffs. A 'perfect world' would be devoid of both tariffs and subsidies, he said.