Germany obtains 1 Billion of euros (1.1 billion of dollars) in additional financing practically free after the bond markets reacted positively to its “historic” expenditure bill, Deutsche Bank AG president Alexander Wynaendts said.
Now, he must spend money wisely and advance structural reforms to ensure that it remains thus, said Wynaendts on Thursday during a round table organized by the Institute of International Finance.
Germany unlocked last week of the hundreds of billions of defense and infrastructure expenses funded by debt, ending the decades of austerity and inaugurating a new period of deficit of deficit designed to stimulate the greatest economy in Europe, modernize the infrastructure of creaky and rebuild its defenses. Berlin was forced to act after President Donald Trump withdrew American commitments to European security.
Markets have generally reacted positively to budgetary change, which, according to Bloomberg economists, should help strengthen growth in the euro region.
“The market very clearly approved” the spending package, which adopted its last legislative obstacle last week, said Wynaendts. “You could even say that we got a Billion of euros at no additional cost.”
Wynaendts said that the sudden abundance of money has the risk of poor allowances after years of underinvestment in defense and disorganized supply systems.
“There will be investments that are not well spent? Absolutely yes, but we have no alternative,” he said.
Germany must also work on structural reforms to ensure that growth fueled by debt becomes sustainable, he said.
“We need a reduction in regulations, we need a tax reform, we need a reform of labor law. So there are a lot of things that must still happen so that this huge investment has a full impact,” said Wynaendts. “We don’t have time to waste this.”
This story was initially presented on Fortune.com
