Transformative Investments Against Stagnation. Is a New Economic Boom Possible?

In a recently published Forum New Economy Working Paper, Senior Fellow Tom Krebs analyses the impact of public investment on the growth of the German economy. In his analysis, Krebs shows that a drastic expansion of public climate and social investments in Germany could trigger an economic boom and at the same time support the transformation to climate neutrality. This would require investments totalling 80 billion euros – two percent of GDP. Such an investment package could give Germany growth rates of up to three per cent over a longer period of time.

A negative scenario in which the German economy barely grows for several years is also possible. Such a stagnation scenario is highly likely to materialise if the federal government sticks to its current fiscal policy and thus prevents a growth-driving investment offensive. Following the decision of the Federal Constitutional Court, the government recently announced a new federal budget for 2024 that provides for radical spending cuts and revenue increases.

The study was also the basis for this guest article in DIE ZEIT.