Economic and Monetary Union

Germany voted and Europe held its breath. Despite the bleak economic performance and outlook of Germany, the promise of ‘economy-centred election campaigns’ never materialized. Yet the list of economic policy homework for the new government is long and urgent. The possibility to form a two-party government of the Christian conservative CDU/CSU and social democratic SPD now needs to be translated into political action – in both Germany and the EU.

Infrastructure deficiencies are paralysing Germany. But as a result of the Schuldenbremse (debt brake), urgently needed investments – including to boost climate protection – are to be postponed. This is both risky and economically short-sighted.

From Russia’s war in Ukraine to the green and digital transformation, we’re not short on challenges nowadays. What we are lacking is the vast sums of money needed to deal with them. The EU requires an estimated 500 billion euros a year for the green transition, while NATO’s European members need to find another 56 billion euros annually to meet the alliance’s 2% defence spending target.

With the floods in northern Germany, the relaxation of the country’s debt brake is back on the agenda. But instead of always returning to the same debates, what is finally needed is sustainable reform. A new study shows what this could look like and sets out the options for financing climate protection over the short term.

An open letter sent on Monday 15 February to European Union leaders asking them to review the EU’s economic governance.