The SPD and Greens propose investment subsidies and tax rises for the rich, alongside reforms to the debt brake, while the CDU wants tax cuts for corporate households, public expenditure cuts, and “hoping for the magic Laffer curve to bring in more tax revenues via higher growth”.
He said while the economic debate ahead of the election centred on whether to lift the brake to fund business tax breaks versus a more statist agenda of public investment to improve roads, the rail network and the digital infrastructure, the need for a bigger military budget will provide the new government with political cover.
EU nations are also exploring the option of joint defence bonds, or an escape clause from the blocs’ “Stability and Growth Pact,” which Germany currently meets, which limits government deficits to 3% of GDP and debt under 60%.
Engelbert Stockhammer, a professor of international political economy at King’s College London, said lifting the debt brake would be key to Germany’s revival.
“Back then [2009] the German approach [to sustainable public finances] was one completely ignoring growth, trying to lead by example with the debt brake.
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