MIL OSI Translation. Region: Germany / Deutschland –
Source: DGB – Bundesvorstand 22.10.2020klartext 36/2020 Corona: Public investments reduce uncertainty The number of infections is rising again and with it the economic uncertainty is growing. In order for the economy to recover, the state must continue to invest in public infrastructure. Because economic output and employment can be increased, especially in bad times.
DGB / calvste / 123RF.com
The higher the number of infections, the greater the economic uncertainty Although such a development was to be expected in the autumn months, economic uncertainty is increasing again. How quickly the German economy will recover from the corona shock depends not only on the further course of the pandemic, but also on whether politicians continue to support demand-oriented economic policy against this background the previous measures of the federal government. In the recently published joint forecast of leading German economic institutes, the DIW makes it clear: “In a recession, economic stabilizing financial policy measures create confidence, reduce uncertainty and stabilize inflation expectations.” Rather, the state must continue to stabilize – also by finally addressing the immense public investment needs. Public investments in infrastructure and personnel not only create sustainable schools and traffic routes, livable communities and well-equipped authorities with motivated and decently paid employees. They also reduce uncertainty and thus stimulate private investments on the part of companies. DGB / Source: Federal Employment Agency, destatis
In addition, public investments increase economic output How strong these positive effects can be in the crisis is also shown by a new cross-border study by the International Monetary Fund (IMF). It comes to the conclusion that investment spending by the state significantly increases private investments, economic growth and employment, especially in times of high uncertainty: Additional public investments amounting to one percent of gross domestic product (GDP) lead to 2.7 percent within two years The investments of private companies are even increasing by more than 10 percent and employment is increasing by around 1.2 percent according to the calculations (see graphic). The positive effect is not only limited to investments in the construction sector, but also significantly promotes other sectors in the industrial and service sectors. Because when companies invest and employment increases, tax revenues also rise. And when the economy grows again, the ratio of public debt to GDP will also decrease. Rapid repayment is fatal It is therefore a good thing that the German debt brake remains suspended in the coming year. But even after that, it must not hinder the necessary investment expansion. In addition, it is fatal that the federal and state governments have undertaken to repay the corona debts unnecessarily at short notice. The federal government alone will have to invest six billion euros annually in repayments from 2023 to 2025, and as much as 11 billion euros per year from 2026 to 2042. Funds that would be used much more sensibly for investments – also in terms of secure and stable economic development.
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