REPEAT: Weidmann: +ve Output Gap No Need for Exp Fiscal Pol

Repeats Story Initially Transmitted at 08:17 GMT Jan 18/03:17 EST Jan 18

--ECB GC Weidmann: Surpluses Needed In Germany Ahead Demographic Changes

By Christian Vits

     FRANKFURT (MNI) - European Central Bank Governing Council member Jens

Weidmann ON Thursday demanded more public money is spent on investments in

research, education and digital infrastructure.

     "A positive output gap does not signal a need for an expansive fiscal

policy stance," Weidmann said in a speech in Frankfurt. It would be rather

advisable "to maintain a safety margin to the existing fiscal rules in the face

of the looming demographic challenges."

     Targeted investments in research, education and, digital infrastructure

"are required to raise growth potential," he added. Pension reforms should tie

retirement age to life expectancy helping to maintain a high pension level while

mitigating losses in labour supply.

     "Most of these measures require a shift in public expenditure from

consumption to investment, rather than additional spending," Weidmann

underlined.

     "In Germany, for example, the period following reunification saw

substantial domestic demand and substantial capital requirements that pushed the

current account into the red for an extended period of time," Weidmann noted. 

     "On the other hand, it is now appropriate for Germany to be running

surpluses, since demographic change will hit the economy particularly hard," he

said.

     According to long-term OECD projections, no major industrial country will

grow as slowly in economic terms over the next decades as Germany.

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com