Sufficient Fiscal Space to Tackle Structural Challenges
Germany retains comfortable fiscal space, as highlighted by its safe-haven status, excellent funding conditions and gradual downward trend in the general government debt ratio to below the 60%-Maastricht threshold by 2028 (Figure 2). Annual general government deficits will average around 1.1% until 2028.
Longer term, the main credit challenges for Germany include its ageing and declining working-age population, as well as balancing the energy transition while maintaining its international competitiveness. Higher investment spending would thus help increase the economy’s growth potential and is necessary to meet long-term demographic and environmental challenges.
Continued delays in addressing…
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