Merz government criticized – Grimm economics: “Election gift”

“Negative effects”

Leading economist Grimm opposes Chancellor Merz

Economist Veronika Grimm sharply criticized the Merz government. In his latest annual report, he warned of the financial consequences of political “election giveaways.”

Leading economist Veronika Grimm laid out a harsh crackdown on the current federal government under the leadership of Friedrich Merz (CDU) in her so-called economist’s annual report. In Grimm’s assessment, “current political decisions – especially the electoral gift of a lack of will to reform – are leading to a rapidly increasing pressure to further weaken the debt brake and/or implement tax increases,” said an additional paragraph written by him in the economist’s report.

The “election gift” means, for example, an expansion of pensions for mothers. Grimm warned of “further risks and negative impacts to business locations”. The current federal government still has a chance to address this, he continued.

For economist Grimm, the committee’s assessment was insufficient. The committee wrote in the chapter: “In the short term, dubious measures such as the expansion of maternal pensions, the permanent implementation of reduced sales tax rates in the catering industry, the expansion of the income tax distance allowance to 38 cents from the first kilometer and additional diesel fuel subsidies in agriculture and forestry should be avoided.”

Economists calculate that this could save more than eleven billion euros per year. They also want to increase revenues by curbing tax evasion and avoidance more consistently.

But Grimm contradicted his colleagues on the Council of Economic Wise Men. He considers statements about the need for structural reform “not far-reaching enough.” The committee should have been “more clear,” he wrote in a paragraph accompanying the general assessment. The fiscal situation from 2030 onwards could develop “significantly less favorable” compared to “calculations in the main text”.

The federal government wants to stimulate more growth primarily with a special fund worth billions of dollars for additional investments in infrastructure and climate protection (SVIK). However, some were criticized because the black-red coalition did not make enough additional investments, instead using special assets for mothers’ pension funds, for example.

By 2030, “only 98 billion euros of SVIK can be classified as additional spending on climate neutrality and investment,” the economists wrote. The additional investment mentioned is less than 50 percent. This means that less than half of these billion-dollar packages allow for additional projects and do not simply replace existing ones. The term investment is defined too broadly, they wrote.

Therefore, the committee called for defense spending to be excluded from the investment quota in the core budget. The experts also want to set up a “monitoring committee” that would ensure that the funds are actually invested and not used to plug budget holes. “A rolling five-year financial plan for federal and state governments will support spending controls and create transparency and reliability,” they continued.