Ifo President Fuest Warns Germany Faces Economic Collapse Without Debt Reduction

Clemens Fuest, president of the Ifo Institute, has issued a stark warning: Germany's high public debt could trigger an economic collapse if left unaddressed. Speaking to the Frankfurter Allgemeine Zeitung, Fuest argued that the country's debt burden, swollen by pandemic and energy-crisis spending, threatens long-term stability. He called for a credible fiscal consolidation plan, warning that without it, interest payments will crowd out essential investments and undermine confidence. Fuest pointed to rising borrowing costs as a sign that markets are losing patience. Germany's debt-to-GDP ratio, above 60% before the crises, has climbed above 70%, and the government's budget faces structural gaps. Fuest emphasized that the current trajectory is unsustainable, especially as the European Central Bank tightens monetary policy. He urged policymakers to prioritize debt reduction through spending cuts and growth-friendly reforms, rather than relying on inflation to erode debt. The warning comes as Germany's economy struggles with high energy prices, a skilled-labor shortage, and global trade headwinds. Fuest's remarks have reignited debate over fiscal discipline versus public investment.