The Economist UK - 16.11.2019

The EconomistNovember 16th 2019 31

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arely do germans celebrate such

measly growth. But the country had

spent so long fearing a slide into recession

that even its third-quarter expansion of

0.1%, announced on November 14th, felt

like a success. After the economy shrank by

0.2% in the second quarter, strong domes-

tic demand and a surprisingly good export

performance were enough to avoid Ger-

many’s first technical recession since 2013.

Still, the country’s long boom, in which

well over 4 m jobs have been created in ten

years, is plainly over.

The fear of looming recession has re-

vived a familiar debate in Germany: should

the government spend more to ward off

danger? Under the so-called schwarze Null

(“black zero”) policy, Germany’s budget has

been in surplus since 2014. Last year, aided

by booming employment and low debt-

service costs, it ran to a whopping 1.9% of

gdp. In some quarters the black zero has

acquired an almost fetishistic quality. Visi-

tors to a wing of the finance ministry in the

state of Hesse can marvel at “Null” (2016),

an installation of interlocking black alumi-

nium circles suspended from the ceiling.

But as Germany’s infrastructure needs

have grown, as its borrowing costs have

plummeted (the yield on Bunds out to ten

years is negative) and as the economy has

slowed, mulish adherence to a balanced-

budget policy has become harder to de-

fend. “Coffers full, country broken!” la-

mented a recent cover of Stern, a weekly,

above a picture of a potholed road. In

wealthy states, dilapidated schools have

been closed for fear of collapse. The state

development bank puts Germany’s munic-

ipal investment backlog at €138bn ($152bn).

A rotating cast of international institutions

passes through Berlin, urging ministers to

turn on the spending taps.

Since March 2018 the finance ministry

has been in the hands of Olaf Scholz, a cen-

trist Social Democrat. Yet hopes for a much

more expansive fiscal policy have been

dashed. The black zero was written into the

coalition deal between Angela Merkel’s

Christian Democrats (cdu) and Mr Scholz’s

spd. Big government programmes, such as

a recent package to reduce Germany’s car-

bon emissions, are designed to satisfy fis-

cal rules rather than the other way around.

Mr Scholz, who is running for the spd

leadership and wants to succeed Mrs Mer-

kel as chancellor, argues that steady fiscal

stewardship has left the country well

placed to react to a severe downturn. (The

yardstick would probably be a marked up-

tick in unemployment.) The response, say

officials, would partly follow the tactics

used in the 2008-09 crisis. Automatic sta-

bilisers, such as unemployment benefits,

would kick in. Social-security subsidies

would make it easier for firms to cut work-

ers’ hours; adjusting tax rules on deprecia-

tion would aim to ginger up private invest-

ment. Finance-ministry officials say that

they will dispense with the black zero if

necessary. Mrs Merkel, for all her homilies

about the state living within its means, is

unlikely to resist. Mr Scholz draws compar-

isons to 2008-09, when Germany mobil-

ised €50bn. “In a real crisis, we’ll spend

money like hell,” says an official.

Germany

Are the black zero’s days numbered?

BERLIN

Germany’s fiscal debate is livelier than ever. But don’t expect a splurge

*Forecast

Not much to worry about

Source: European Commission

Germany, % of GDP

General government

gross debt

Budget balance

0

20

40

60

80

1995 2005 19*

-10

-8

-6

-4

-2

0

2

1992 2005 19*

Europe

32 Elections in Spain

33 Ireland’s compensation culture

33 Leonardo da Vinci’s wine

34 Charlemagne: Reading the cards

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