But what are the challenges that the new government will face? Many of these
coincide with challenges on the European level. This brings me to a podcast conversation that I had with Thomas Losse-Mueller earlier this year (in German!). This conversation
was a broad tour d’horizon on topics I have thought and written about over the past decade, but several of these are directly relevant for the current political discussion in Germany and for the next German government: First, there has been a rediscovery
of the role of the government both in aggregate demand policies and as insurer of last resort, as we have clearly seen during the current pandemic. Second, this applies beyond the national level to the European level, especially the euro area level. The pandemic
has opened the door towards a fiscal union, first on the expenditure side, but in future also on the revenue side. There has been also a change in the German position, both among politicians and economists, with the realisation that the privilege of Germany
as anchor country of the euro area (thus reaping a euro dividend) also implies certain responsibilities. Ultimately, the European economy can only recover if all countries recover with a similar trajectory, given their close economic integration. Third,
it is critical that the heavy lifting is not left exclusively to the ECB as during the eurodebt crisis, where expansive monetary policy was offset by tightening fiscal policy in many core countries, including Germany.