The ongoing economic expansion in Germany and the Euro Area are heavily dependent on the ECB’s highly accommodating monetary stance. Structural reforms and a reduction of large public sector debts remain, however, elusive in many countries. In addition, Brexit and the rise of Eurosceptic parties pose grave challenges. Even in Germany, currently a stronghold of stability, the incumbent government has not done enough to prepare for inexorably unfolding future challenges such as globalization and aging.
This is, in large strains, the diagnosis defended by the German Council of Economic Experts (GCEE), a government funded, but independent economic policy advisory body. In its latest Annual Report, submitted to Chancellor Merkel on November 2, the GCEE dissects these challenges and develops a policy agenda which could serve as blueprint for Germany’s next government (to be formed in the fall of 2017). At the European level, the GCEE argues for strict subsidiarity in EU economic policy-making, a strengthening of Europe’s banking sector, as well as an insolvency rule for Euro Area sovereigns. With this line of reasoning it also rebuffs international criticism of Germany’s alleged fiscal restraint and strongly makes the case for the ECB pursuing a less expansionary monetary stance.