IMF: Germany Should Consider Easing Debt Brake

The sun sets behind the financial district early evening in Frankfurt, Germany, October 4, 2018. REUTERS/Kai Pfaffenbach Purchase Licensing Rights
The sun sets behind the financial district early evening in Frankfurt, Germany, October 4, 2018. REUTERS/Kai Pfaffenbach Purchase Licensing Rights
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IMF: Germany Should Consider Easing Debt Brake

The sun sets behind the financial district early evening in Frankfurt, Germany, October 4, 2018. REUTERS/Kai Pfaffenbach Purchase Licensing Rights
The sun sets behind the financial district early evening in Frankfurt, Germany, October 4, 2018. REUTERS/Kai Pfaffenbach Purchase Licensing Rights

Germany faces rising spending pressures and the government should consider easing the debt brake, the International Monetary Fund said on Tuesday, but finance ministry sources said such a move carried the risk of fuelling inflation.

Altering the rules of the debt brake, which limits public deficits to 0.35% of gross domestic product, would require a two-thirds majority in the upper and lower houses of parliament.

"Germany's debt brake is set at a relatively tight level, such that the annual limit on net borrowing could be eased by about 1 percentage point of GDP while still keeping the debt-to-GDP ratio on a downward trend," the IMF said in a report.

This would allow more room for "much-needed" public investment, it said, according to Reuters.

In November, a court ruling blew a 60 billion euros hole in public finances and threw the government's financing framework into turmoil.

Although reforming the debt brake would ease fiscal consolidation, reforms to reduce medium-term spending pressures and increase revenues were also needed, the IMF added.

The brake is fiercely defended by Finance Minister Christian Lindner. According to finance ministry sources, the IMF recommendation carries risks.

"Reforming the debt brake harbours the risk of once again fuelling inflation, which has only just started to fall," said the sources, adding that higher debt also meant higher interest rate costs.

In its World Economic Outlook published in April, the IMF cut its forecasts for German gross domestic product to 0.2% growth in 2024 and 1.3% in 2025, expecting a gradual consumption-led recovery this year as inflation continues to ease.

A return to growth is expected to gradually reinforce confidence, further bolstering consumption in 2025.

Private investment is also expected to recover in 2025 on the back of improved demand and moderate monetary policy during 2024 and 2025. "As a result, GDP growth is projected to accelerate to between 1.0% and 1.5% during 2025-26," the IMF said.

Over the medium term, rapid population aging is expected to slow growth and adversely affect public finances.

As baby boomers retire and recent immigration waves subside, the annual growth rate of Germany's working-age population is expected to fall by around 0.7 percentage points, more than any other G7 country.

These unfavourable demographics are projected to slow annual growth to around 0.7% over the medium term.

The IMF said medium-term growth prospects could be bolstered by increasing public investment, including in the green transition and digitalisation.

To further boost productivity and entrepreneurship, the government should deepen efforts to cut red tape and promote digitalisation, the IMF advised.



Saudi's flynas Strikes Deal for Additional Airbus A320neos, 15 A330s

Saudi's flynas strikes deal for additional Airbus A320neos, 15 A330s (flynas)
Saudi's flynas strikes deal for additional Airbus A320neos, 15 A330s (flynas)
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Saudi's flynas Strikes Deal for Additional Airbus A320neos, 15 A330s

Saudi's flynas strikes deal for additional Airbus A320neos, 15 A330s (flynas)
Saudi's flynas strikes deal for additional Airbus A320neos, 15 A330s (flynas)

flynas, Saudi Arabia’s leading low-cost carrier, has signed a Memorandum of Understanding (MoU) with Airbus for 75 A320neo family aircraft and 15 A330-900. This strategic agreement will expand the airline's capacity, range and enhance its overall fleet capabilities.
Signed during Farnborough International Airshow in the presence of President of the General Authority of Civil Aviation (GACA) of Saudi Arabia, Abdulaziz bin Abdullah Al-Duailej, Chairman of the Board of NAS Holding Ayed Al Jeaid, flynas Chief Executive Officer & Managing Director Bandar Almohanna, and Airbus Chief Executive Officer, Commercial Aircraft, Christian Scherer, Airbus said on its website.
The new aircraft will join the carrier’s all Airbus fleet serving international, domestic and regional routes. The new A330-900 aircraft will boast a two-class configuration, accommodating up to 400 passengers.
"We are excited to further strengthen our long-standing partnership with Airbus," said Bander Almohanna, CEO and Managing Director of flynas. "The A320neo Family provides exceptional operational performance and environmental benefits, allowing us to offer unique, low-cost travel experiences. Additionally, the A330neowill enhance our long-haul capabilities with its advanced technology and efficiency while supporting our growth plans and Saudi Arabia’s pilgrim program."
Airbus Chief Executive Officer, Commercial Aircraft, Christian Scherer said, "We are delighted to expand our partnership with flynas through this significant milestone for both A320neo and A330-900 aircraft. The A330neo will allow flynas to further grow into widebody markets by building on the A320, benefiting from Airbus’ unique commonality. Both aircraft types offer flynas the perfect versatility and economics to expand into new markets while offering their passengers the latest cabin experience and comfort. We look forward to continuing our successful collaboration with flynas as they embark on this exciting new chapter."
The addition of the A330-900 aircraft will support flynas' ambitious growth plans. The airline anticipates significant operational efficiency gains by combining the new widebody aircraft with its existing A320neo fleet. The A330-900 offers increased capacity and range at unrivaled seat costs, ensuring flynas can compete effectively in the growing regional market, a key focus area for the airline.
The A330neo delivers unbeatable operating economics, powered by the latest-generation Rolls-Royce Trent 7000 engines, featuring new wings and a range of aerodynamic innovations resulting in a 25 percent reduction in fuel consumption and CO₂ emissions compared to previous generation competitor aircraft. The A330neo is capable of flying 8,150 nm / 15,094 km non-stop, providing ultimate comfort with more passenger space, a new lighting system, latest in-flight entertainment systems and full connectivity throughout the cabin.
As with all Airbus aircraft, the A330 family is already able to operate with up to 50% Sustainable Aviation Fuel (SAF). The manufacturer is targeting to have its aircraft up to 100% SAF capable by 2030.