World Economy

Lagarde Calls on Germany to Invest More, Raise Wages

Lagarde Calls on Germany to Invest More, Raise WagesLagarde Calls on Germany to Invest More, Raise Wages

While in Germany, IMF chief Christine Lagarde has argued that larger German investments could help reduce regional and global imbalances that she’s concerned about. Her advice did not go down well in Frankfurt.

The head of the International Monetary Fund, Lagarde, on Thursday joined calls from a growing number of economists for substantially bigger German investments in the years ahead, DW reported.

Speaking at a conference with top economists and policymakers in Frankfurt, Lagarde noted increasing investments would “help to reduce global imbalances which we’re concerned about at the IMF.”

She also called on German policymakers and companies to stoke wage growth so as to boost inflation in the 19-member eurozone. “We have also advised the government in Berlin to spend more on reforms that help women go back to work, such as opening more child care centers and kindergartens” as well as “creating training programs for refugees”.

Lagarde hinted she saw no reason why Germany couldn’t spend budget surpluses to invest more in public infrastructure such as roads, railways and digitalization.

Some of her remarks met with a rather frosty reception, though. German central bank chief Jens Weidmann argued his country should “maintain a safety margin to the existing fiscal rules in the face of looming demographic changes”.

Chancellor Angela Merkel’s conservatives have pursued a policy of balanced budgets calling for paying down old debts and avoiding creating new ones.

The question of public spending has been a key source of friction between Merkel’s conservatives and the Social Democrats, who reached a preliminary deal on forming a coalition government, with the details yet to be hammered out.

Bundesbank chief Weidmann insisted that increased spending was not the solution, arguing that what’s required was “a shift in public expenditure from consumption to investment”.


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