Angela Merkel rejects criticism by Germany’s ‘wise men’

Chancellor Angela Merkel has brushed off criticism from Germany's so-called economic "wise men" that her policies are undermining growth in Europe's largest economy.

The five state-appointed economic experts downgraded their economic growth forecast from 1.9 per cent to 1.2 per cent for this year, and 1 per cent next year. Presenting their findings yesterday, their main criticism was not that Berlin was spending too little – a common concern around the continent – but spending too much.

Their 400-page report attacked the Christian Democrat/ Social Democrat (CDU/SPD) grand coalition for prioritising “redistribution over efficiency”. They took issue with a partial rollback of pension reforms and questioned the economic sense of an €8.50-an-hour minimum wage from next year.

Geopolitical challenges

Dr Merkel disputed the main findings of the report before putting it in a roomy drawer, never to be seen again, saying Germany’s slowdown was down to “geopolitical challenges” in Ukraine and the Middle East, she said, not domestic concerns, and she pointed to a €10 billion German investment programme, announced last week, as a positive step.

She questioned the economists’ opposition to the minimum wage, saying it was “not easy to understand how a policy that is not yet in force is already an economic drag”.

The SPD dismissed the five wise men and their "radical neo-liberal nonsense" as irrelevant. It suggested the analysis offered since 1963 by the economic wise men – and one woman – had "no longer kept pace with the times".

But the wise men stood their ground yesterday, saying the grand coalition had not created a “mood of economic upswing”. Quite the opposite: Germany’s economic slowdown had “caught up with” the coalition’s plans for a retirement age rollback – an SPD demand – and a top-up pension payment for mothers.

Given Germany’s greying population, any plans to spend more money on pensions – an estimated €7 billion by 2017 – meant public finances were “not sustainable in the long term”.