Government debt's strategic deployment is urged by the International Monetary Fund's chief
In a recent interview with the "Süddeutsche Zeitung," Clemens Fuest, President of the Munich-based Ifo Institute, expressed concerns about excessive state debts and inefficient public spending in Germany.
Fuest, who is also involved in the Investment Summit that aims to kickstart economic transition and growth in the United States, emphasized that the country is facing a rapid and strong decline in the working population. This decline, he believes, reduces the United States' ability to service future debts.
The Ifo chief warned against inefficient public spending, citing poor investments that do not generate a return or result in losses as a potential burden on future generations. Empty regional airports, for instance, are given as a negative example of such spending.
However, Fuest also believes that investments in areas such as education, digital infrastructure, climate protection, and research and development could yield future returns. He advocates for the federal government to use state debts for investments that make economic sense, stating that such investments are justified if they yield a higher return in the long run than the interest to be paid.
Fuest did not specify what he considers to be "excessive" state debts in his statements. Similarly, he did not specify which investments he was referring to in his previous statements about debt-financed investments. It is unclear if the Investment Summit is related to the investments Fuest previously mentioned as being justified.
Fuest also believes that the younger generation is justified in objecting to excessive state debts. His remarks suggest a potential burden on future generations if state debts are not managed carefully.
The federal government could invest specifically in education, digital infrastructure, climate protection, and research and development, areas that Fuest suggests will also be profitable for future generations. Fuest's statements underscore the importance of careful management of state debts and the need for investments that will generate returns for the future.
