January 11, 2018 / 1:16 PM / 9 months ago

Germany should lower taxes only when ECB reduces its stimulus: Ifo

BERLIN (Reuters) - There is no end in sight to Germany’s economic boom and the next government should lower taxes gradually starting next year when the European Central Bank is expected to unwind its monetary stimulus, the Ifo institute’s chief economist said on Thursday.

FILE PHOTO: Fireworks explode in front of the skyline with the financial district during New Year's eve celebrations in Frankfurt, Germany, January 1, 2018. REUTERS/Kai Pfaffenbach/File Photo

“The economy is firing on all cylinders, the upswing is entering a new boom phase,” Timo Wollmershaeuser told Reuters in an interview, adding there were production bottlenecks and an over-utilization of capacities in practically all sectors.

He urged the next government to take the strong economic growth into account when considering more fiscal stimulus.

“If the economy continues to perform so well, it would be wise to postpone the planned tax cuts and implement them only gradually, ideally not until 2019 when the ECB is likely to turn off its money tap,” Wollmershaeuser said.

He confirmed Ifo’s growth forecasts for the German economy to expand by 2.6 percent this year and by 2.1 percent in 2019. “It could even be a bit more, there are more upside than downside risks to this forecast,” Wollmershaeuser said.

Reporting by Michael Nienaber,

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