Germany: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Germany

KEY ISSUESContext:? Germany fundamentals are sound: balance sheets are generally healthy,unemployment is at a historic low, and the fiscal position is strong.? While a recovery is underway, medium-term growth prospects are subdued and thecurrent account surplus remains high. The economy also faces a still weakinternational environment, lingering uncertainty (including about future energycosts), and fast approaching adverse demographic changes.? Germany could do more to increase its growth, thus strengthening its role as anengine of euro area recovery.Policy recommendations:? Germany has the fiscal space to finance an increase in needed public investment,particularly in the transport infrastructure. Unlike public consumption, this woulddurably raise German output and have measurable growth spillovers on the rest ofthe euro area.? Further reforms in services sector regulation would boost competition andproductivity.? Greater clarity about the future energy sector regulatory framework wouldencourage private investment in the energy infrastructure and beyond andstrengthen the outlook.? Decisions on the future level of the minimum wage should take into account theemployment effects in certain regions.? Banks should keep strengthening their capital position ahead of the completion ofthe ECB's Comprehensive Assessment.? The macroprudential framework needs to be ready as monetary conditions are set toremain accommodative for a prolonged period.