The German government has been told it should increase public investment spending to bolster Europe’s largest economy as it faces a recession.
That advice comes in the annual report from a panel of economic advisers appointed by Berlin and known as the ‘five wise men.’
The German government still anticipates economic growth of 0.2 percent next year. The International Monetary Fund’s much more gloomy forecast was for a 0.8 percent fall. The ‘wise men’ predicted GDP growth will be flat.
In her response, Chancellor Angela Merkel said: “Right now, we’re living in times when it’s very difficult to correctly predict the economic situation. However, it seems to me that there’s not a big difference between our two forecasts. The 0.2 percent is certainly within the statistical margin of error.”
Berlin is planning various measures to generate about 50 billion euros in investment and contracts to help Germany’s economy withstand the effects of the financial crisis.
The economic advisers felt more was needed. They said the government could now justify increasing public sector borrowing to pay for additional investment.