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German finance minister criticizes Inflation Reduction Act, WH responds

Apr 17, 2024, 11:27am EDT
North America
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German Finance Minister Christian Lindner criticized the U.S. Inflation Reduction Act, arguing that a similar measure in Germany wouldn’t necessarily bring down inflation.

Some in Germany think the IRA — a 2022 law that made massive climate and energy investments — “could be an example for Germany,” Lindner said at Semafor’s World Economy Summit on Wednesday. “But I will be very polite … if we look at the economic development in the U.S., the inflation rate is higher again.”

“Why do you dream of an Inflation Reduction Act in Germany when the Inflation Reduction Act of the U.S. fails to reduce the inflation?” Lindner said. Inflation in the U.S. is down since 2022, but ticked up last month.

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As a result of the hotter-than-expected inflation, the U.S. Federal Reserve may hold off on making interest rate cuts this year, while the European Central Bank signaled it could start cutting rates in June.

“People complain about my moderate, restrictive budget policies. But probably we will be seeing a reduction in the interest level by the ECB this year … which would improve our economic prospects,” he said.

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Speaking later in the morning at the World Economy Summit, Jared Bernstein, Chair of the White House Council of Economic Advisors, responded to Lindner’s criticism, saying, “it should be obvious to anyone that the IRA is about a lot more along with inflation reduction,” particularly in funding green technology.

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“It’s more accurate to call it ‘dis-inflation act’ since it focuses more on reducing prices, like drug costs,” Bernstein said.

The U.S. economy has seen a strong recovery since the pandemic, while Germany’s has had several quarters of zero or negative growth, in part due to persistent inflation. He said the German economy is experiencing a “hangover.”

“Given the circumstances,” Lindner said, “I think we have shown resilience.”

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