Financial expert analyzes: Budget freeze and debt brake suspension as German economic rescue?

Financial expert analyzes: Budget freeze and debt brake suspension as German economic rescue?

According to a report by www.berliner-zeitung.de, the federal government has imposed a budget freeze and plans to suspend the debt brake in 2023. This raises the question of whether these measures can protect the German economy from a free fall.

Falling household spending was already amplifying the economy's contraction before the budget crisis, and gross domestic product (GDP) fell 0.1 percent in the three months to September. Consumer spending fell 0.3 percent from the previous quarter, while government spending rose. The high prices for food weaken the purchasing power of private households, which has a negative impact on the consumer climate. The International Monetary Fund (IMF) forecast says that Germany is the only industrialized country whose economy will shrink this year.

The future of the German economy is weighed down by high energy prices and weak global growth. However, investments in equipment and buildings have provided positive impetus. Trade with foreign countries is declining, leading to a decline in exports and imports. Nevertheless, the new index from the Ifo Institute shows a slight improvement in the business climate.

The impact of the federal government's measures on the German economy is difficult to estimate. The planned suspension of the debt brake and the budget freeze could help to increase government spending and thus stimulate the economy. However, the ongoing difficulties due to high energy prices and falling export figures could potentially offset the positive effects. It is therefore crucial to closely monitor developments in the coming quarters in order to carry out an in-depth analysis of the actual impact on the market and the financial sector.