German Economy Set for Recovery but Requires Reforms, Says Bundesbank’s Nagel

The German economy is expected to recover as temporary challenges such as high inflation and interest rates diminish, although significant reforms are necessary in areas like immigration and childcare, according to Bundesbank President Joachim Nagel.

Germany’s economy is facing a second consecutive year of contraction, driven by declining demand for exports and weakened domestic activity due to elevated borrowing costs.

Nagel criticized the media’s pessimistic portrayal of Germany’s economic situation, emphasizing that the Bundesbank maintains a positive outlook for recovery once certain factors, including decreased demand from other European nations, subside.

“The media seems to be competing to present alarming news about the German economy,” he remarked at an event organized by the German association of family businesses. “It’s clear that some of these factors are only temporary. We anticipate that the German economy will gradually regain momentum.”

However, Nagel, who represents Germany on the European Central Bank’s Governing Council, acknowledged existing structural challenges, including high fuel prices, excessive bureaucracy, and a shortage of skilled labor.

He advocated for comprehensive reforms, such as establishing a price on carbon emissions, centralizing financial administration, strategically attracting foreign workers, and improving childcare facilities to enable more women to enter the workforce.

Nagel noted that the Federal Government is attentive to the economic policy areas he highlighted and commended its Growth Initiative but stated, “Much still depends on implementation, and there is a great deal of work to be done.”