The economist Lars Feld, one of the most famous lawyers for the German debt brake, has been the special advisor to the Minister of Finance Christian Lindner since February. Faced with stagflation, it recommends reducing public spending and debt.
by
Lars Feld receives us by video, from a room where the piles of papers go up to the ceiling. He is at home in Friborg-en-Brisgau, in Baden-Wurtemberg, the city where he holds the university’s economic chair. But he frequently goes to Berlin. In February, the economist was appointed special advisor to the Minister of Finance, the democrat-liberal Christian Lindner, president of the FDP party. A “role” which he provides “volunteering”, specifies Mr. Feld in the world, anxious to “keep his independence”. “My only boss is the rector of the University of Friborg,” he insists.
Difficult, however, to deny the very strong political weight of this commitment. Lars Feld is a disciple of the “ordoliberal” school, a current of thought which defends a limited role of the State in the economy, a solid currency and a limitation of public debt. The economist is the most famous lawyer for the “debt brake”, the constitutional system which confines the structural deficit of the federal state at 0.35 % of annual GDP. Thus, when Christian Lindner presented, on May 11, his new “budget policy strategy”, Lars Feld was by his side during the press conference. The message was clear: it is time to return to more budgetary rigor and the reduction of debt.
The episode was a little revenge for Lars Feld. In February 2021, the Minister of Finance at the time, the current Social Democratic Chancellor Olaf Scholz, opposed the extension of his mandate at the head of the “Council of Wise men”, the expert council for the evaluation of general economic development. The budgetary rules were then at the heart of the debate, the Social Democrats and the Greens claimed a reform of the debt brake, accused of unnecessarily restricting public investment, at the time when inflation was low, sustained growth and where ‘Germany could borrow at negative rate. Lars Feld had to leave the prestigious cenacle, after ten years of service.
warnings
A year later, the economic situation has radically changed. Inflation, which had been disappeared, made a brutal return to Germany, in the wake of the disturbances of the world supply chains, the war in Ukraine and the lack of labor. And Lars Feld, reinforced in its warnings that the interest rates would inevitably end up going up, has further gained influence. “I speak very clearly of stagflation,” explains Mr. Feld, who expects high inflation this year, around 7 % to 8 %. At the same time, economic activity has been stagnating for two quarters, and the prospects are bad. “The situation is not the same as in the 1970s, in particular because of the labor market. But stagflation is not a frequent phenomenon. And politics has few options to deal with a situation of this genre. It must be said clearly. “
You have 50.16% of this article to read. The continuation is reserved for subscribers.