Germany must increase its investment to improve competitiveness – but not at the expense of higher debt, finance minister Wolfgang Schaeuble has said.
His comments, in a newspaper interview on Sunday, follow a raft of economic evidence that shows Europe’s most important economy is slowing down.
Last week financial markets had a torrid time, partly rattled by the sight of a weakening German economy.
Mr Schaeuble is under pressure to boost infrastructure spending.
The list of potential projects includes roads, railways, and energy and broadband networks.
In the interview with the Welt am Sonntag, Mr Schaeuble said criticism that the government was not spending enough was justified, but that it was trying to alter that.
“We must invest more and improve our competitiveness. We must get to work on this – quickly and in a concrete way,” he said.
Germany, Europe’s largest economy, is now expected to grow by just 1.2% this year, rather than 1.8%, with growth of 1.3% in 2015, down from a previous estimate of 2%.
Mr Schaeuble said that any improvement in spending would not be made at the expense of a balanced budget.
He said he still expects to balance the books next year, which would be the first time the country had kept debt in line with income since 1969.
The German economy contracted by 0.2% between April and June this year, while figures released last week showed that exports fell by 5.8% in August, the largest monthly drop in five years.
These followed weak industrial output figures and recent surveys showing a fall in business confidence.