According to an IMF release issued on 19th May, “Germany remains an anchor of regional stability. Balance sheets are generally healthy, fiscal consolidation has been broadly achieved underpinning confidence, and financial conditions for enterprises are favorable. Private consumption should benefit from solid wage and employment growth, while business investment should continue to strengthen. However, while domestic demand is expected to contribute to growth more than in the past, the decline in the current account surplus is projected to be gradual. Risks to the outlook are broadly balanced.”

IMF staff has recommended that German Government should focus on increasing growth in the country while at the same time supporting the recovery in the euro area. The Staff believes that higher public and private investment and services sector reform in Germany would raise medium-term output, reduce the large and persistent current account surplus, and generate appreciable positive demand spillovers to the rest of the euro area, thus helping rebalancing within the monetary union.

The release says: “Stronger public investment, particularly in the transport infrastructure, is needed and feasible. The government's decision to boost spending in this area is welcome, but the amount is small relative to estimated needs. Additional investment up to 0.5 percent of GDP per year over four years could be financed without violating fiscal rules and would have only a minor impact on the debt-to-GDP ratio given the growth offset. Such a program would yield a persistent increase in GDP by crowding in private investment and would also stimulate growth in the rest of the euro area.”

It adds: “Further reforms in services sector regulation could boost competition and productivity. There is scope for deepening competition in several areas of the services sector. In professional services (accountants, architects, engineers, lawyers, tax consultants, etc…), greater flexibility could be introduced in the areas of exclusive rights, compulsory chamber membership, and regulation on prices and fees.”

IMF staff has called for Greater clarity about the future energy sector regulatory framework would encourage private investment . The release notes: “While the goals of the Energiewende are clear, there are implementation challenges. Surveys indicate that uncertainty about energy policy has been discouraging investment by firms outside the energy sector.”

It says that the announced reform of the renewable energy law has usefully clarified important elements of the strategy, including – for the short term – the contentious regime of exemptions for energy-intensive, internationally-active firms.