Bloomberg Talks Bundesbank President Joachim Nagel Talks Risk of Recession
Apr 23, 2025
Joachim Nagel, President of the Bundesbank and guardian of Germany’s monetary policy, delves into the looming threat of recession due to US tariffs. He outlines how these trade tensions could exacerbate economic woes, prompting the European Central Bank to consider lower interest rates. Nagel anticipates a surge in public spending from Germany’s new government as a remedy for economic recovery, projecting better times ahead for the economy. His insights underscore the intricate dance between fiscal policy and global trade dynamics.
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Impact of US Tariffs on Germany
- Tariffs imposed by the US are causing significant problems and could lead Germany to a slight recession this year.
- Monetary policy can guide stable prices but may not fully offset the economic drag from tariffs.
Currency Effects of Tariffs
- The tariff impact may cause prices to rise more in the US than in Europe, reducing inflation pressure in Europe.
- The weakening of the US dollar and strengthening of the euro can have a disinflationary effect on euro-denominated imports.
Germany's Shift in Fiscal Policy
- Germany plans to increase public spending on defense and infrastructure despite its zero debt tradition.
- This fiscal approach aims to improve economic growth without fueling inflation amid current stagnation risks.