By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said Thursday that Germany's economic prospects were improving thanks not only to substantial fiscal stimulus but also to the adaptability and competitiveness of German businesses.

Speaking at a panel discussion on stakeholder capitalism at ESMT Berlin, Nagel, president of Germany's Bundesbank, said the capacity of German companies to adapt to changing economic circumstances should not be underestimated.

He said businesses were increasingly recognizing structural transformation as an opportunity to improve their performance and competitiveness, citing the strengths of Germany's small and medium-sized enterprises as well as its larger companies.

Nagel recalled that during the recent International Monetary Fund meetings in Bangkok, he had been struck by the improvement in international perceptions of the German economy.

He said it had been a long time since he could recall such positive assessments of Germany's prospects, including upward revisions to growth forecasts.

However, Nagel emphasized that the more favorable outlook was not simply the result of the government's large fiscal package, but also reflected the underlying strengths of German industry and companies' willingness to adapt their business models.

Turning to the broader economic environment, Nagel described the past several years as an exceptionally turbulent period, marked by the pandemic, Russia's invasion of Ukraine, the Middle East conflict and the emergence of artificial intelligence.

Nagel, who took office in January 2022, said he would previously have found it almost inconceivable that inflation could reach 10%, as it subsequently did following Russia's war of aggression.

He said he expected economists looking back on the period to conclude that it had been extraordinarily challenging, with successive shocks creating new problems that required policymakers to reconsider established methods and instruments.

While acknowledging that such developments were particularly interesting for economists and students, Nagel expressed hope that economic conditions would eventually become more predictable.