Germany needs large-scale reforms to stimulate long-term growth, according to an OECD report, which adds that the new government's massive spending plan will help Europe's largest economy recover, AFP reported.

Plans to invest hundreds of billions of euros in defense and infrastructure over the next few years are “a step in the right direction,” OECD President Mathias Cormann said at a press conference.

“Additional measures are needed to ensure that the money is spent effectively and efficiently,” Cormann said at the presentation of the report alongside German Economy Minister Katherina Reiche.

Germany's GDP has fallen over the past two years, with businesses hit by high energy prices and growing competition from China.

The economy is showing signs that it may have passed the most difficult phase this year, but the OECD analysis pointed to problems that could slow growth in the future.

Among the problems identified are a shortage of skilled workers and excessive bureaucracy in Germany.

The OECD report recommends removing some regulatory differences between regions in Germany and making it easier for skilled migrants to move to the country.

Shifting taxation from income to property is also a way to encourage Germans to work harder and longer, Cormann said.

“As life expectancy increases, Germany will have to continue to improve incentives for older workers to remain in the labor market,” Cormann added.

Reiche, who has been in office since the formation of the government last month, agreed that Germany needs reforms.

Among the measures supported by the minister are steps to make the labor market more flexible and to attract immigrants into the workforce.

“We need to integrate people who can work more quickly,” she stressed. “There is no doubt that we need to do better in this area.”

According to the report, Germany is the OECD country where migrants have the lowest chances of finding a job. |BGNES