German business lobby, labor union jointly call on Berlin to boost public investment

[November 18, 2019]  BERLIN (Reuters) - Germany's BDI industry association and the DGB trade union called in a rare joint statement on Monday for the government to rethink its budget priorities and massively boost public investment to make Europe's largest economy fit for future growth.

The unusual move by Germany's most influential business lobby group and the country's largest umbrella union show how much public debate has shifted in a country long obsessed with its "black zero" budget policy of no new debt.

With the economy barely growing and Berlin's borrowing costs at record lows, Chancellor Angela Merkel and Finance Minister Olaf Scholz are facing growing pressure at home and abroad to ditch their self-imposed balanced budget pledge, which limits the fiscal room to increase public spending.

"This is not primarily about fighting symptoms of a recession, but rather tackling the more deeply rooted causes of weak growth," BDI President Dieter Kempf said, adding that the government had a duty to preserve and improve Germany as a business location in order to secure long-term prosperity and employment.

Kempf said the government should increase public investment in digital and transportation infrastructure by half a percentage point of overall economic output, which would be roughly 16 billion euros per year. The federal budget foresees investments of 43 billion euros for 2020.

A general view shows the skyline of the West city center with the Memorial Church in Berlin, Germany, November 6, 2018. REUTERS/Fabrizio Bensch

DGB head Reiner Hoffmann said a long-term public investment program was the only way to secure the sustainability of Germany's growth model and with it, well-paid jobs.

"We can no longer afford it to put the prosperity of future generations at risk with such an outdated infrastructure and underfunded education system," Hoffmann said, adding that more public investment would also strengthen social cohesion and promote equal living conditions across the country.

Germany's state-owned development bank KfW has estimated that municipalities across the country are suffering from pent-up public investment needs of 138 billion euros.

Boosting German investment would be positive for the broader euro zone. The new president of the European Central Bank, Christine Lagarde, has singled out Germany as a country that could deploy its budget surpluses to help growth in the bloc.

(Reporting by Michael Nienaber; Catherine Evans)

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