Germany: More pro-cyclical fiscal stimulus to the economy - ING

Carsten Brzeski, Chief Economist at ING, points out that in its first meeting after the summer break, the German government demonstrated enthusiasm to act and deliver on its social promises, adding more pro-cyclical fiscal stimulus to the economy.

Key Quotes

“Last night, the German government agreed on a series of social policy measures, all targeted at increasing purchasing power and stabilising pensions.”

“The political leaders of the three coalition parties agreed to improve pensions for older mothers and disabled pensioners, reduce employees’ contribution to the unemployment insurance scheme by 0.5 percentage points to 2.5% and guarantee to keep pensions stable at 48% (of roughly the average salary over 45 years) until 2025, while at the same time capping pension contributions at 20% (currently at 18.6%).”

“All measures should become effective on 1 January 2019.”

“Last night’s agreement shows that the German government is trying to deliver on its promises made in the coalition agreement.”