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Advisers bemoan lack of reforms in Germany

November 2, 2016

The German government's panel of economic advisers has said the current legislative period under Chancellor Angela Merkel has not seen enough reforms to prepare the nation for big future challenges.

https://p.dw.com/p/2S1CA
German Council of Economic Experts
Image: picture-alliance/dpa/A. Dedert

Presenting its annual economic report in Berlin on Wednesday, the German Council of Economic Experts said the grand coalition government had largely failed to capitalize on the country's positive growth climate and labor market boost.

The panel of advisers, formerly called "Five Wise Men" but now comprised of four men and one woman, said Chancellor Angela Merkel's government should have launched a reform offensive with a view to preparing for future challenges, adding that the few measures it had taken might even harm the free market economy in the final analysis.

The advisers specifically mentioned the introduction of a minimum wage across all sectors and some cautious changes to the pension system.

They emphasized that in their view it was crucial to do away with all "hidden" and unjust tax hikes and revisit the retirement age issue against the background of people living a lot longer now.

For her part, Merkel rejected the panel's criticism. 

"For us, it is always time for reforms," Merkel said. "I believe the federal government feels and thinks that it is permanently introducing reforms."

ECB policies in the firing line

The German Council of Economic Experts also called on the Central European Bank (ECB) to scrap or at least reduce its huge bond-buying program. The panel acknowledged that the lender's ultra-loose monetary policy had initially helped to crank up the eurozone economy.

Wage dumping in the digital economy

"But the current scope of that program is no longer justified," the experts concluded, given the steady recovery in many of the euro area's 19 member states.

Most, but not all panel members spoke out against any measures to further regulate China's investment offensive. They said they were aware that there was no level playing field for German investors in China, but argued that even a one-way openness toward direct foreign investment could pay off in terms of more productivity and higher wages. Most panel members did not share wide-spread fears in society that in buying up German companies, Chinese investors were only after those companies' technological know-how and intellectual property.

hg/jd (Reuters, dpa)