In an interview with Capital and Stern, the Bundesbank President discussed growth forces in Germany and an increased statutory retirement age, as well as the urgent need for investment in infrastructure, digitalisation and defence. Both Germany and Europe as a whole should be more confident in how they present themselves to the rest of the world: We mustn’t sell ourselves short, Mr Nagel said.

In the interview, he highlighted the fact that both the style of communication and the relationship between policymakers and central banks in Germany differed from those in the United States: The Bundesbank’s role is respected – in monetary policy as well as in economic policy advice. Above all, our independence is held in high regard. 

With regard to the economic situation, Mr Nagel said, Complaining and being overly pessimistic won’t get us anywhere. We need to focus on our opportunities – of which we have many. After two years of recession, economic growth in 2025 was very low, but the first signs of impetus from the fiscal package were already in sight for 2026. In 2027, we could then go on to achieve growth of more than 1 %, Mr Nagel said. However, recovery was not self-evident, and the environment was still challenging, plagued by wars and conflicts. Germany could break free of its period of weakness by bolstering growth forces and increasing productivity. 

In order to compensate for the large numbers of workers now entering retirement, people in Germany would have to work for longer in the future, Mr Nagel stated, adding: For quite some time now, I have been arguing in favour of working for longer and remaining in employment. The Bundesbank advocates linking the retirement age to developments in life expectancy as from 2031: if the latter continues to rise as expected, the retirement age could gradually increase to around 69 by 2070. A funded private pension scheme would also be a sensible option. In this vein, there were enough proposals to put private pension provisions on a significantly better footing.

However, public administration was not running smoothly enough for an upswing. In addition to a clear energy policy strategy, lower burdens on corporate taxes and investment in future-oriented areas such as AI were also needed, in particular. Mr Nagel saw the greatest need for improvement in Germany’s strategy implementation, saying: We no longer have time for inaction. Everyone needs to commit.

Bundesbank presents debt brake proposal

With regard to the Federal Government’s investment plans, Mr Nagel said: It is vital that as much money as possible is channelled into infrastructure, digitalisation, and defence. The government was addressing the right areas here, he added. Furthermore, efforts were being made towards mobilising private capital to a greater extent. However, the Bundesbank was keeping a watchful eye on how the new scope for borrowing would be used. 

According to Mr Nagel, the Bundesbank had presented a clearly structured proposal for the debt brake: We show how we can put a stop to the upward trend of rising government debt over the medium term and anchor the debt brake at 60 % again in the future.

Excessive bureaucracy a problem

Mr Nagel said that both Germany and Europe as a whole should be more confident in how they present themselves to the rest of the world: I see how other countries display the strength of their economies, even show off. But when I take a closer look at the figures, I sometimes wonder where this excessive optimism is actually coming from. Germany and Europe should not sell themselves short. Germany was leaving opportunities on the table here, too, he continued, stressing: You can still earn good money in Germany and Europe, and that is definitely something that can be highlighted. Germany had a lot to offer, such as excellent vocational training.

In Europe, excessive bureaucracy was a problem, the Bundesbank President said. According to one study, financial market regulation alone now comprised more than 1,600 documents totalling over 95,000 pages and regulations. Reporting requirements or data queries needed to be streamlined significantly: Europe was not playing at its full potential. Many investors wanted to diversify more broadly and mitigate risks that could be posed by US dollar investments. The euro had established a strong position for itself, but there was still plenty of room for improvement. Europe must not be seen as a continent that is no longer capable of reform, Mr Nagel said. With regard to the role of the United States and China, he stressed: Developments in other currency areas are just one factor among many here. We are targeting an inflation rate of 2% over the medium term. We have practically achieved this, and the inflation rate will continue to fluctuate around this value in the near future, too. At present, he saw some inflationary pressures at play in the United States, as high tariffs on imports were gradually making themselves felt. Interest rate cuts could raise prices there even further.

Regarding China, he said that he was taking a cooperative approach: It is important to also address the issues that are creating difficulties for our firms. We need fair trading conditions. Europe could bring its market power to the table here: Europe is 450 million people and a strong economic area – these are 450 million key consumers for China as well.