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Merkel protege says priority is to invest as economy stutters

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Merkel protege says priority is to invest as economy stutters
FILE PHOTO - German Defence Minister Annegret Kramp-Karrenbauer attends a meeting with NATO Secretary General Jens Stoltenberg in Brussels, Belgium July 31, 2019. Stephanie Lecocq/Pool via REUTERS   -   Copyright  POOL(Reuters)
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BERLIN (Reuters) – The head of Germany’s conservatives said on Thursday speeding up investment must be a priority as fears of recession in Europe’s biggest economy grow, and that strict fiscal rules have flexibility built in so need not be abandoned immediately.

Worries about a slowdown in Germany have prompted calls from some left-leaning politicians and even some in industry for the government to kick-start growth by ditching its balanced budget rule to finance more public investments.

“Above all, we must invest in things. At the moment we have in the federal budget the means available for transport infrastructure or other things,” conservative Christian Democrat (CDU) leader Annegret Kramp-Karrenbauer told n-tv.

Asked if it was time to abandon the balanced budget policy, she said experience showed that achieving a good economy was not incompatible with having a balanced budget.

She also said that existing rules enshrined in the constitution have exceptions built into them for times of crisis or emergency.

“Therefore we do not need to put to one side the principle in itself straight away,” she said. Her spokeswoman said she was referring to the so-called debt brake which limits new debt, although she had referred to the balanced budget policy in her reply.

Her comments were slightly softer than those of some conservatives, many of whom see the balanced budget goal, introduced by former finance minister Wolfgang Schaeuble, as sacrosanct. The government has said there is currently no need for further measures to stabilise the economy.

Kramp-Karrenbauer, who took over from Chancellor Angela Merkel as head of the CDU in December, made clear that her priority was to tackle bureaucracy which was slowing down investment.

She acknowledged some other steps might be needed to reassure voters, welcoming a study by the labour ministry into a possible scheme for subsidies for workers whose hours are cut.

Data on Wednesday showed that the German economy contracted in the second quarter due mainly to a slump in exports, and few economists expect a swift recovery, raising the prospect of a recession.

(Reporting by Andreas Rinke; Editing by Peter Graff)

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