Turning Around Germany’s Investment Dynamic Requires a Bold Economic Policy Approach

Aggregate investment in Germany has developed much less dynamically than forecast prior to Russia’s invasion in Ukraine. The reasons for the subdued investment dynamic are uncertainty about future energy prices, increased interest rates and – in the case of housing investment – increased construction costs. The recently propsed Wachstumschancengesetz is insufficient to fundamentally alter these obstacles. Bolder policy measures are needed.