Joachim Nagel, president of the Bundesbank, who has called for a softening of Germany's rigid 'debt brake'. Photograph: Alex Kraus/BloombergThe head of Germany’s Bundesbank has called on Berlin to soften its tough spending rules, warning that Europe’s largest economy faced a “complicated” and “weak” outlook.
In her memoir Freedom, published last week, former chancellor Angela Merkel insisted the brake remains essential to avoid a debt mountain for future generations but added that it “needs to be reformed to allow higher levels of debt to be assumed for the sake of investment in the future”. The Bundesbank will not officially update its growth forecast until later this month, but Mr Nagel said 2025 was likely to be “another year of weak growth” for the German economy, with the central bank’s estimate likely to be about 0.4 per cent.
Mr Nagel said he was still confident that the country could overcome any crisis, saying: “Past experience shows that when Germany is feeling the pain, Germany will change.” In the run-up to the snap election, which is likely to take place in February, an overhaul of the strict borrowing cap has become a central topic. The leader of the opposition and most likely candidate to secure the chancellorship, Christian Democratic Union party boss Friedrich Merz, has signalled he might be open for limited reforms of the debt brake.Mr Nagel said in March that Germany “in certain periods of time” could run “slightly” higher deficits without putting stability on the line.