The former chief economist of the ECB and old Bundesbank-hand Otmar Issing is a friend of clear-cut statements. In his most recent intervention in the Financial Times he made clear that (i) Germany is neither in a recession nor is there (ii) any risk of deflation. Hence, monetary policy of the ECB is much too expansionary for Germany, and there is no need for the German government to be fiscally expansive . All those cries for an active fiscal policy on the part of Germany is seen by him as just that, desperate cries of governments without adequate fiscal space who ask Germany for the rescue. Issuing actually has a point – at least if we see the German economy as a national economy that is widely open to the rest of the world. A truly active fiscal policy may not be necessary at this point, given her full employment level. However, this perspective is a crass misinterpretation of reality. Since 1999 Germany is no longer a national economy but a regional economy of the Eurozone. Hence, it is no longer adequate to look solely with national lenses on the German economic situation. If we take the Eurozone view, Issing is mis-analyzing the situation. The Eurozone is on a fragile growth path that is far away from a ‘traditional’ recovery; some ember economies are already in a deflationary situation, and others suffer from very low inflation rates that are a far cry from the ECB-‘target’. Monetary policy, thus, is not too expansive, and there is a strong need for active fiscal policy. The fiscal governance that is so much asked for by fiscal orthodoxs’ like Issing asks for restraint, and indeed fiscal space for most member economies does only allow for fiscal stimuli if those governments would deliberately violate the SGP.

Issing does not stop here. According to him IMF, World Bank and academics ignore basic economic reasoning and fall fallacy to  dogmatism when  they ask for German deficit spending. His attempt to turning the table is admirable but not convincing because his favouring of a supply-side policy does not address the underlying problems of the Eurozone. He has a point by flagellating the recent policy projects of the Grand Coalition -like the pension reform and the child premium as well as the minimum wage legislation – that were more addressing election considerations then combing competitiveness with fairness considerations. His suggestion to restructure the budget from social policy projects to investment projects is too late and, more so, only follows the simple supply-side logics that social benefits would come automatically when only the supply-side is being managed properly. History has shown that this cause-outcome-chain is broken. Fairness has become a critical criteria for public policy. In this regard it is only reasonable that Germany should optimally use its existing fiscal space by developing projects that drive sustainable growth and contribute to improvements of fairness. There is no lack in such projects. There is a lack in political vision and willingness, though, as long as even the caucus of the SPD accepts such mis-conceptualized plans like the ‘Black Zero’.