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German finance ministry sees subdued economic activity over winter

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BERLIN — Germany’s finance ministry expects activity in Europe’s biggest economy to remain subdued during the fourth quarter of this year and first quarter of next and sees declining inflation rates during 2023, it said in its monthly report.

“Overall, economic developments are expected to remain subdued in the winter half (year),” said the report, published on Thursday.

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“However, relatively stable labor market developments and the government’s relief measures … are providing supportive impetus,” it said, adding that current estimates pointed to declining inflation rates, albeit at a raised level, next year.

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Tax revenues rose 2% in November from the same month last year to 55.95 billion euros, it said. In the first 11 months of the year, the tax take increased by 8.7%.

In an interview in the report, Finance Minister Christian Lindner said his response to Russia’s invasion of Ukraine had led to higher debt levels than he would have liked. This, however, was unavoidable as a special response to challenges such as soaring energy prices was required.

“Otherwise, the long term economic damage for our country would be bigger than the burden of current debt,” he said.

Since Linder took over the finance ministry a year ago, debt has risen to about 500 billion euros, including a 200 billion euro protective shield against high energy prices and 100 billion euros to modernize the armed forces.

However, the minister said he aimed to return to a sustainable, stable financial policy in the long term.

“If we succeed in exiting these crisis measures, we will see a significant reduction in overall debt at the end of this decade and the start of the next,” he said. (Reporting by Madeline Chambers and Christian Kraemer; Editing by Alex Richardson)


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