THE BIRDLINGS, THE ANT, THE OAK & THE TORTOISE
‘Reimagining Growth’ is a hot 2025 Davos topic. No surprise: the global economy finds itself in a tight cul-de-sac. Nations face mounting pressure to stimulate growth, that supreme elixir that boosts geopolitical relevance and financial flexibility, thereby reducing the unpopular pressure to redistribute wealth through taxes. Many governments are visibly prepared to do anything to spur growth.
Yet, concerns over structural inflationary pressure and rising government debt levels have significantly increased the cost of financing growth in developed nations since 2020. As a result, fiscal and monetary policies are heavily constrained. If artificial intelligence and deregulation hold the potential to unlock significant economic growth, the proof is in a pudding that has yet to be baked.
Nowhere is this financial and political impasse more daunting than in Europe. The well-publicized ‘Draghi Report’ (2024) outlines the EU’s lag behind the U.S. and China in digital technologies, infrastructure, defense, and energy. While the US has gotten its mojo back, European pessimism loomed over Davos. Like the birdlings in Jean de La Fontaine’s fable who ignored the swallow’s warning, Europe now finds itself caught in the nets of its inaction. ‘We heed a danger but when it appears.’
Who could contribute to making Europe great again?
Germany, the world’s third-largest economy, is a compelling candidate. Unlike most advanced nations that clock government debt-to-GDP ratios of 100% or higher, Germany’s level stands just above 60% of GDP.1 Jean de La Fontaine’s ant would approve: ‘There's a time for work and a time for play,’ and Germany has diligently built a strong balance sheet.
A simple calculation suggests that Germany has a fiscal firepower of about $1.6 trillion1 – almost 10% of the European Union’s GDP. This sum could be multiplied by partnering with private equity, debt funding, and a fiscal multiplier to unlock eye-watering economic power. Germany now has a pivotal opportunity to lead an ambitious agenda, both for itself and the European Union.
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However, fiscal conservatism is deeply ingrained in Germany’s culture and enshrined in a government debt brake, a constitutional rule introduced in 2009 that limits structural deficits to 0.35% of GDP.
Historically, Germany’s fiscal rigidity, much like the oak in de La Fontaine’s fable, has been a source of strength. But, in today’s climate, sustained economic performance requires the flexibility of a reed: ‘Bend, not break.’ The February elections could prove pivotal in reshaping Germany’s fiscal policy, though a constitutional amendment would require a two-thirds majority – no small feat in a likely fragmented parliament.?
Should Germany, with its formidable assets (including manufacturing excellence, highly skilled workforce, work ethos, and strategic location), decide to loosen its self-imposed fiscal restraints, the resulting shift in sentiment and, ultimately, economic activity would be profound, both domestically and abroad.
The persistence of Jean de la Fontaine’s tortoise offers hope. ‘The race is not always to the swift.’ But even the tortoise must move forward. And in the right direction.