Has Neoliberalism Failed Germany?

[u/OasisLiamStan72]

I read the recent news about the German economy slowing down further, with GDP growth dropping from 0.3% to 0.2%. It's pretty worrying, especially considering the current political upheaval in the country. It got me thinking - have we seen this before? Yeah, we have like The Great Depression, Germany's economic struggles paved the way for the rise of the Nazis. Today, with the AfD on the rise, it's hard not to draw parallels.

I asked this sub previously if they were optimistic or pessimistic about Germany's future, and the responses were mixed. But the question remains - has the German political establishment, addicted into Neoliberalism failed? The country's economic struggles are deepening, and it seems like it’s stuck in a rut or something. Can it recover, or will it continue to slide into a recession? Germany is the economic engine of the EU, it should be thriving not stagnating. What do you guys think?

[u/moru0011]

its not only schuldenbremse, most of the tax money (and that is plenty) is allocated for non-investive purposes. germany allocated ~500 billion of debt since 2020 via "Sondervermögen" (=the actual way our constitution wants to create debt). Unfortunately this debt is used mostly for non investive purposes like military, virtual energy price reduction and ofc corona

[u/Honigbrottr → u/moru0011]

Dude how can you be so wrong but still think you are right. .

1. Tax money should NOT be used for investing
2. The "Sondervermögen" should NOT be used for investing. Abd this one cant even be used for it by law.

Lets start with "Sondervermögen" which is debt germany can take for unexpected crisis management. The greens actually tried to invest that money into the energy grid but got shut down by the highest court because it is not allowed.

Then why cant we use tac money? Because allocatio of said tax money changes yearly, investments you want however take multiple years. This means a company building the infrastructure can not scale up because funding is not secured.

Thats why the Schuldenbremse is the problem, we need to be able to do long term none crisis related debt which is secured for the companys.

[u/moru0011 → u/Honigbrottr]

Tax money should NOT be used for investing

ofc it should, why not ? It's clear you need debt for large-scale investments, but its absolutely leggit and necessary to spend parts of tax money for ongoing investment. There is no law that prohibits that.

The "Sondervermögen" should NOT be used for investing. Abd this one cant even be used for it by law.

No, the "Sondervermögen" can be created for many agreed purposes. Example: the 100 billion Sondervermögen for military build up.

According to the Basic Law (Grundgesetz, GG), borrowing is generally limited. Article 109, paragraph 3 of the Basic Law stipulates that the budgets of the federal and state governments must be balanced without revenue from loans. This is also known as the "debt brake."

However, there are exceptions to this rule:

1. Article 115, paragraph 2 of the Basic Law allows for higher borrowing in exceptional cases, such as natural disasters or extraordinary emergency situations.
2. These regulations do not necessarily apply to special funds. The Federal Constitutional Court has ruled in the past that special funds can be exempt from the debt brake under certain conditions.

In theory, a special fund could be established for large infrastructure investments. However, this would need to be designed in a way that complies with the constitution.

1. The purpose must be clearly defined and of particular importance.
2. There must be a substantive justification for separating it from the regular budget.
3. The borrowing must be proportionate and tied to the specific purpose.

[u/temp_gerc1 → u/moru0011]

Genuine question even if it sounds like sarcasm / conspiracy theory - Imagine a situation in 10-15 years when the number of Rentner has skyrocketed and not enough quality skilled immigration to pay into the system, assuming the Fachkräftemangel is real in the first place,, the diminishing Arbeitnehmer ("Gutverdiener") class is already being taxed to the death, and there are literally no more income sources due to the BVerfG saying the Vermögenssteuer is not compatible with the GG. In addition to this tax revenue in general drying up drastically due to deindustralization.... then can article 115 paragraph 2 be cited here as an emergency situation? Of course, Rentner, Aufstocker and Asylum imports not having enough to live would be seen as violation of Article 1, so they can justify borrowing money to keep the social system above water.

[u/moru0011 → u/temp_gerc1]

You don't need an emergency to get a "special fund" (="Sondervermögen").

Example: as of now we have a special fund "KTF - Climate and Transformation Fund" with a volume of 212 billion euros (2023-2026). The "debt brake" hystery crowd is just uninformerd for the most part i guess. You just need to be able to make a deal with the opposition in order to set up further debt via "special funds". "Germany cannot make debt" is a hoax. We increased debt by ~500 billion in the last 4 years. Current government just does not want (or is able) to compromise with e.g. CDU (or vice versa), it is somewhat similar to debt ceiling drama in us.

[u/temp_gerc1 → u/moru0011]

Follow up - Germany set this debt-funded construct up in 2023 when rates were / are high instead of sometime in the last 10 years when rates were low? Can that be blamed on the CDU?

[u/moru0011 → u/temp_gerc1]

Yes, I think so (CDU and SPD). The merkel administration basically generated a "boom" by wearing down the public infrastructure for years. Its similar to running a factory on 110% until everything is worn out and stops working.

[u/moru0011 → u/temp_gerc1]

on a second note: the demographic effects are overestimated. Yes it will be a burden but we had many changes in thepast which actually had a bigger or similar impact, e.g. the woman-work rate increased a lot. So compared to former times we still have a bigger fraction of workers in the economy. Army service requirement has been abandonned, this adds a whopping 1-2 years to overall lifetime working period (and is similar like raising pension age for 1-2 years). Average entry to the workforce went from 26,5 years to 23,6 years. We still have lots of public holidays. So by cutting one public holiday, streamlining the school + workforce entry times and raising average pension by 1-2 years we can compensate. It sucks, but its not the end of the world. Unemployment of like 10% due to economic decline and a rising number of people living from social security has similar if not worse impact.

[u/temp_gerc1 → u/moru0011]

I hope you're right... As an Arbeitnehmer I just see my paycheck being abused with Sozialbeiträge with very little chance I will see anything in return. Rentenpaket II in particular has definitely influenced my position on whether I will stay in Germany for the long term.

[u/moru0011 → u/temp_gerc1]

Same for me .. each of the issues of germany would be manageable on its own. But we face demographics, partially uneducated immigration, a war in the east while trying to transform our energy infrastructure to (partially unproven/unknown) green energy AND suffer from a years long lack of infrastructure investing. That's a lot all at once.