Expansionary fiscal policy must end, says German finance minister
5:46 am Tuesday, February 21st, 2023
By Christian Kraemer and Maria Martinez
BERLIN (Reuters) – Germany must end its expansionary fiscal policy or risk fuelling inflation, German Finance Minister Christian Lindner told Reuters in an interview.
“Rising interest rates are already a signal for the government to see that it can’t continue like this,” Lindner said.
Lindner said Germany was monitoring inflation developments closely and had already introduced a raft of measures to curb inflation.
Among those are electricity and gas price brakes that come with savings incentives, as well as a tax-free inflation premium that allows employers to compensate for higher inflation without raising salaries, “making a potential wage-price spiral less likely,” he said.
The International Monetary Fund (IMF) recently warned that second round effects could lead to higher inflation again following some easing, and urged central banks to act decisively to tame inflation to avoid such a scenario.
Lindner said that IMF warnings had to be taken seriously. “I am sure that the European Central Bank is also following the situation closely,” he said.
(Reporting by Christian Kraemer and Maria Martinez, Editing by Friederike Heine)
