IMF: The decline in Germany’s productivity requires a 1% reduction in ‘slow debt’ of GDP.

It faces some serious economic challenges, the resolution of which calls for ambitious reforms, says in a report by the International Monetary Fund ( ), with the adaptation of the limits of ‘soft debt’ being one of them in order to strengthen public investment and competitiveness. As Germany was the only G7 economy to shrink last year and is to be the economy of the seven with the slowest growth this year, according to IMF forecasts, some analysts claim that the economic model has been irreparably dismantled. Although Germany’s commercial size has returned to levels before energy shock, the weak image of the economy results from a combination of factors. The country’s working-age population has been strengthened in the last decade by immigrants fleeing war conflicts. As this migratory wave ends and baby boomers retire over the next five years, the rate of growth in Germany’s workforce will decrease more than in any other G7 country. This will exert downward pressure on GDP per person, because there will be fewer workers for each pensioner. It will also lead to a combination of higher social security contributions and lower pensions if there are no reforms. And an older population will increase demand for healthcare services, distracting workers from other branches. The lack of labour could also prevent investment. As the IMF says, another solution is to increase productivity, which has been swept away by insufficient investment in public infrastructure with Germany near the bottom of advanced public investment economies. In order to strengthen them, the country could increase the financing of public investment by reforming other costs, mobilising more revenue, or adjusting the limits of ‘false debt’ for federal lending, as explained in the latest IMF expert report. The debt brake could relax by about 1% of GDP, while allowing the reduction of public debt as a percentage of GDP.