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Chief Economist at the Federal Ministry of Finance, of the Federal Republic of Germany,

Berlin, from Frankfurter Allgemeine Zeitung, Frankfurt, Germany, June 16, 2016

The consolidation of the financing of the states has

been preliminarily finished by most of the Western

World countries at the moment. This is proven by the

latest forecast of the European Commission, and this is

welcomedbymanyof the topeconomistsof theKeynesian

School of Thought. Also, most of the international

organisations are satisfied, unless that they are even

calling for more additional expenditure programs. It

seems that one especially likes to shoot at Germany, in

order to transform the last tiny space of “fiscal space” into

more short term demand and long term debt. In spite of

expense increasing politics in Germany for refugees, for

more investments and for higher social entitlements, it is

still not yet enough, as express experts like Joseph Stiglitz,

several international organisations and several prominent

politicians in other parts of the world.

In view of all the love for a strong demand, one likes to

overlook, that there are reasons to continue the healing

of the financing of the states. Because demand requires

trust. This is not really created, when the fiscal virtue is

deferred to tomorrow, or when it then again is also not

considered as acceptable, to then to defer it further to

forever and a day.

Firstly, things are not that bad for most of the Western

World economies, in spite of exceptions, and the

unemployment ratio is low. Europe is growing above

average, the United States of America are growing in the

seventh year. There is no convincing evidence of a global

lack of demand or a crisis, which would call for such a

global stimulus. In Germany, the situation is rather more

one of full to excessive capacity utilisation, so that a

stimulus here does not make any sense at all.

secondly, there is neither in Germany nor in other

countries the often quoted “fiscal space”, that is leeway

for more government expenditures. Most of the

industrial countries rather have the problem of record-

indebtedness, which has been strongly increased after

the Financial Crisis. On average for the Euro-Zone the

government debt has increased by short of 50 % to over

90 % of GDP. In the G 7-countries, the total debt of the

state is even at 120 %, in the United States of America

higher than 100 %, and in Japan around 250 %. The debt

ratio, though, is at the moment not increasing further in

most of the countries, but it also does hardly go down,

because there is hardly any progress when it comes to

decreasing the annual government budget deficits.