(Bloomberg) --
Germany's economy is not yet in the dire straits that would justify stimulus measures, and Chancellor Angela Merkel's ruling coalition should resist calls to boost spending, according to Deutsche Bank AG.
“The government should only act if there is clear evidence that we might be at the brink of a deep recession,” Stefan Schneider, the lender's chief economist for Germany, wrote in a note Friday. “Despite the undoubtedly massive economic policy uncertainties we do currently not expect such a scenario.”
Germany's export-oriented economy is flagging after being slammed by global trade disputes, uncertainty over Brexit and a disruptive technological shift in the automotive industry. The threat of recession has prompted some politicians to join critics of the country's balanced budget policy and call for taxpayer-funded spending programs to boost growth.
German Suspicion of Stimulus Risks Too-Late Recession Response
Schneider said Germany's attempts at macroeconomic fine-tuning in the 1960s and 1970s caused a “stagflation disaster” that should serve as “ample warning for those who believe they are clever enough to make this upswing –- already the longest of the last 50 years -– last forever.”
A stimulus package would be a “waste of tax money” and the government should instead continue to increase investment in education and infrastructure and promote Germany as a business location, he added. “This would really help to prop up growth in the long run.”
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Iain Rogers, Jana Randow
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