Germany to push G20 for structural reforms to prevent crisis

Germany will push for reforms to make the world’s biggest economies more competitive and protect against future crises when it takes the helm of the G20, Finance Minister Wolfgang Schaeuble said on Friday, dimming hopes of fiscal stimulus to boost growth.
“We will forcefully insist on structural reforms to improve our resilience against developments that have the potential to lead into crisis,” Schaeuble told the Bundestag, the lower house of parliament.
“There is no lack of debt in this world, there is no lack of central bank liquidity in this world, but there definitively is a lack of competitiveness in this world because many countries have missed out on many reforms.”
Germany, which has rejected calls by the European Commission for more fiscal stimulus to help boost euro zone growth, takes over the G20 presidency — grouping leading developed and developing economies — at the start of December.
Schaeuble said this week that the European Union’s executive should not direct its call for fiscal stimulus at Germany as Europe’s biggest economy has increased investment more than the euro zone average in the last decade.
Schaeuble warned on Friday that “developments leading into crises can be detected all around the world.”
Germany says a lack of structural reforms by its euro zone peers is hampering a full recovery in the currency bloc. Some other euro zone countries, led by France and Italy, would like budget leeway to stimulate growth through public spending.
The G20 was founded in 2009 during the financial crisis.
Earlier reports said that growth in leading euro zone economies slowed over the summer months and an expected German-led rebound at the end of the year may prove too short-lived for the European Central Bank to unwind its monetary stimulus.
Germany’s quarterly growth rate halved to 0.2 percent in the three months to September even though private consumption and state spending rose, as weak foreign trade slowed overall activity in Europe’s biggest economy.
Confirming a preliminary reading, the Federal Statistics Office said on Thursday that net foreign trade subtracted 0.3 percentage points from GDP growth as exports fell 0.4 percent on the quarter and imports rose 0.2 percent.
State spending increased by 1.0 percent in July-September, contributing 0.2 percentage points to growth. German authorities are spending billions of euros on accommodating and integrating more than one million migrants who have arrived since the start of 2015, many from war zones in Syria and Iraq.
Household spending rose by 0.4 percent, also adding 0.2 percentage points to growth, as consumers benefited from high employment, rising real wages and low borrowing costs.
“Many in Germany like to complain about Mario Draghi’s policy of low interest rates, but actually Germany in particular is benefiting from it,” VP Bank economist Thomas Gitzel said, adding that cheap loans were giving construction a push.
“Also thanks to Draghi, Finance Minister (Wolfgang) Schaeuble is managing the balancing act of increasing investment in public infrastructure without net new debt.”
Investment in construction edged up 0.3 percent in the third quarter while investment in plant and equipment fell by 0.6 percent, a sign that German firms are holding off investment.
In an unusually downbeat report, the ECB said on Thursday that political upheaval on both sides of the Atlantic is raising financial stability risk in the euro zone, which could increase concern about some countries’ ability to finance their debt.
Elections and referendums could fundamentally shift the political landscape, triggering sudden capital flows and market volatility, it warned.
Data for other euro zone countries pointed to a modest and fragile recovery in the 19-member currency bloc, driven mainly by domestic demand.
In Spain, the euro zone’s fourth biggest economy, growth slowed slightly to 0.7 percent in the third quarter from 0.8 percent in the April-June.
In France, the bloc’s No.2 economy, the central bank predicts growth to double to 0.4 percent in the final quarter from just 0.2 percent in the third. Industrial morale there held steady in November for the third consecutive month.
German business confidence also held steady at a high level in November, suggesting executives remain upbeat following Donald Trump’s victory in the US presidential election.
The US is Germany’s most important trading partner and Trump’s protectionist rhetoric has unnerved many euro zone exporters — in addition to the uncertainty created by Britain’s June vote to leave the European Union.
The Munich-based Ifo economic institute’s business climate index was unchanged from 110.4 last month.
“The German economy seems to be unfazed by the election of Donald Trump as US president,” Ifo chief Clemens Fuest said. “Confidence in the German economy continues to be good.”
German companies were again more satisfied with their current business situation, but somewhat less optimistic regarding the coming months, the monthly survey showed.
“If there is a ‘Trump effect’, it could show up later though — that’s what we saw after the Brexit vote,” Ifo economist Klaus Wohlrabe said.

Source: Arab News