After the election victory, the Hessian economy calls for reforms for a new course!

After the federal elections, Hessian business associations and unions are calling for comprehensive reform to address the economic challenges. Wolf Matthias Mang, President of the Association of Hessian Business Associations (VhU), congratulated the Union on its election victory and expressed regret at the FDP's departure. He is pushing for rapid coalition talks in order to form a government capable of acting, as the economic conditions are difficult.

The Hesse economy showed minimal growth of 0.2% in the first half of 2024, while the entire Federal Republic recorded a decline of 0.2%. The chemical industry association warns that “the smelter is on fire” and calls for a new government by Easter. Business associations are pushing for far-reaching reforms that include cutting bureaucracy, cutting taxes and lowering energy prices. Energy prices in Hesse fell by almost 6% last year, which is a positive development.

Calls for reform and investment

The Hessian Chamber of Industry and Commerce emphasizes the need for stable framework conditions, which are essential for investments and innovations. The DGB Hesse-Thuringia union, on the other hand, is calling for greater government investment in infrastructure and jobs as well as a reform or abolition of the debt brake in order to create more financial scope for necessary investments.

While employer representatives advocate maintaining the debt brake and increasing government austerity measures, Ulrich Kater, chief economist at Dekabank, proposes to temporarily relax the debt brake in order to be able to finance a comprehensive reform package. Kater emphasizes the importance of a clear commitment to economic growth.

Debt brake in the focus of economists

In a broader context, a discussion about the debt brake dealt with the collapsed budget at the end of 2023. Five economists propose a reform of the debt brake that covers several aspects. This reform calls for longer borrowing to give the federal government more time to deal with external shocks. In addition, the debt limit should be made more variable, depending on the debt ratio.

With a debt ratio below 60% of GDP, a structural deficit of up to 1% of GDP could be permitted. The reform aims to increase the flexibility of fiscal policy without endangering the sustainability of public finances. The proposals have received mostly positive feedback from the economist community, with some critics criticizing the lack of earmarking for new debt.

Read more about the details here hessenschau.de and capital.de.