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Germany's new weakness in the world - and Lindner's clear answer to it

It is only a few hundred meters that Federal Finance Minister Christian Lindner (FDP) would have to walk down Pennsylvania Avenue in Washington to get from the main building of the International Monetary Fund (IMF) to the White House.

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Germany's new weakness in the world - and Lindner's clear answer to it

It is only a few hundred meters that Federal Finance Minister Christian Lindner (FDP) would have to walk down Pennsylvania Avenue in Washington to get from the main building of the International Monetary Fund (IMF) to the White House. So he could easily get there what he was briefly denied during his visit to the USA in spring because of his corona infection: the obligatory pictures on Lafayette Square with the White House radiating so much power in the background. Olaf Scholz (SPD) was already there in front of the cameras, as was Robert Habeck (Greens).

But Lindner did without it, at least for the first two days of his stay in Washington. This is certainly due to the tight schedule between all the panels and bilateral talks that he held with his fellow finance ministers from other countries, not only at the IMF events but also in the context of the G7 and G20.

But beautiful pictures in front of a lush green lawn and lush red flower borders in the garden of the White House don't quite fit the messages that Lindner had to send home from Washington - and also wanted to.

From his point of view, Germany cannot be satisfied with how it will develop economically in the coming year. "Compared to other industrialized nations, Germany obviously has a lot of homework to take from Washington to Germany," he said, referring to the IMF's growth forecasts for 2023 presented this week.

The experts expect that the economy in Germany will shrink more in the coming year than in all other major economies. Specifically, the IMF is now assuming a minus of 0.3 percent, which is 1.1 percentage points less than the estimate from July.

Lindner's analysis: Germany has been resting on its supposed strengths as an export nation for too long. "We believed that our global competitiveness needed only to be managed, not strengthened through political efforts," he said. This is exactly why the traffic light government will expand renewable energies and speed up approval processes. As a result, prices would sooner or later fall and competitiveness would increase.

The coalition partners in Berlin will be happy to hear this approach. The words on the traffic light line matched Lindner's obvious resolution for the days in Washington not to further fuel the dispute within the federal government that had been going on for weeks. When asked about the extension of the nuclear power plants or the troubled waters in which the FDP found itself after the defeat in the state elections in Lower Saxony, he always responded by pointing out that this was not "an issue here in Washington".

But then Lindner laid the foundation for a possible conflict between the SPD, the Greens and the FDP, which could quickly gain importance in the coming months depending on how the economy develops: the high tax rates for the economy in Germany. "It's not breaking news if I tell you that I think a reform of corporate tax law in Germany is necessary," he said. So far, however, there has been no parliamentary majority in the German Bundestag. So far.

Lindner made it clear that he also sees tax cuts in the next few years as part of the homework he is taking with him from Washington. "In the past, the German business model was also supported by the fact that we had cheap energy imports and were therefore able to afford high tax rates," he said. In the medium term, consideration must be given to how tax policy can also make its contribution to increasing competitiveness again given an overall increase in costs.

In the short term, as Lindner also made clear, the fight against general price increases is the focus. "Inflation can erode the economic foundation," said the finance minister. It inhibits corporate investment and makes citizens poorer.

He agreed at a press conference with Bundesbank President Joachim Nagel. "I think it's likely that on average for the year, and that's a number that you're now hearing from the Bundesbank, there will be a seven before the decimal point," said Nagel. So far, the Bundesbank had expected an inflation rate of over six percent for 2023.

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