How necessary is an anti-recession programme?

Is the demand for governmental measures in light of the slowing in economic activity justified or is an economic stimulus package too expensive and inefficient? Walther Otremba, Federal Ministry for Economics and Technology, warns against taking the economic problems of the US and Europe too lightly. Also in Germany he cautions against a false sense of security. Despite correct and successful reforms, the upswing in Germany has been only of average strength in relation to other comparable industrialised countries; the losses of the years 2001-2005 have only been made up by about two thirds. Otremba underscores that short-term business-cycle developments and longer-term growth movements are closely linked to each other. Therefore, it is sensible to implement specific growth-friendly economic and fiscal-policy measures at the proper time, i.e., when the dynamics of economic output are clearly about to weaken. "A correct growth-policy measure cannot be wrong in cyclical terms. What is important is to avoid reflex-like reactions, to liberate ourselves from classical thought patterns of supply and demand policies, not to exaggerate individual goals of economic and fiscal policy and to make decisions in a way that the economy will emerge strengthened from the current cooling-off phase as the result of cyclically appropriate, citizen-friendly growth policies." Jürgen Rüttgers, Minister President of North-Rhine Westphalia, calls for an anti-recession programme with a longer time horizon for policies promoting more growth and innovation. One of his concerns is a simplification of taxation law, a national commodity concept and better rules for the financial markets. For Michael Hüther, Cologne Institute of the German Economy, the present cyclical weakening is primarily the result of the credit market crisis and the development of international commodity markets. Since the two shocks basically affect the economic supply side, the challenge for economic policy lies in increasing especially the adaptability of businesses. Only in this way can firms deal appropriately and sufficiently quickly with the supply shocks. For Otto Kentzler, Federation of German Crafts and Small Businesses, all previous experience shows that the attempt to control and stabilise economic activity through credit financed government spending programmes are doomed to fail. In his opinion they have a short-lived impact but immense subsequent damage: additional state indebtedness, further taxation burdens and a further erosion of confidence of citizens in the reliability of economic and fiscal policies. Also Volker Treier, Federation of German Chambers of Industry and Commerce, warns against anti-recession programmes: they end up a debt trap, always come at the wrong time and discourage private engagement. And for Kurt J. Lauk of the CDU's economic council, most economic activity programmes are ineffective and expensive.