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Economic and european policy

In this section you find analyses and commentaries on European (and especially German) economic and fiscal policy. Particular attention is devoted to the institutional development of the EU, above all monetary union, and its individual policy areas.

252 (51-60)
May 24, 2017
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The traditional German export sectors pay their employees above-average wages and salaries. The top right-hand quadrant of the chart shows those sectors that generated a foreign trade surplus in 2016 and also paid their employees gross wages and salaries above the average for the manufacturing sector as a whole. In the automotive industry alone, the foreign trade surplus in 2016 was EUR 122 billion (39% of the total surplus). Wages and salaries in this sector were 27% higher than the industry mean. Mechanical engineering took second place in terms of foreign trade surplus (2016: EUR 94 billion). [more]
53
April 28, 2017
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The diesel scandal and political uncertainty surrounding future regulation are the main reasons why the proportion of vehicle registrations accounted for by diesel cars has slumped recently in Germany and most other EU countries. If the automotive industry wants to continue to rely on diesel technology, it needs to regain credibility and get to grips with the issue of emissions – including in real-world driving conditions. If it doesn't manage to do this, lawmakers are likely to progressively tighten the regulatory framework for diesel cars. However, should the industry succeed in bringing to market clean diesel cars at affordable prices, these cars would remain the most economical option for a large proportion of motorists – at least until alternative drive technologies become competitive from the customer perspective. This would make current proclamations of the death of diesel somewhat premature. [more]
54
April 6, 2017
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In international debate public investment is often regarded as a useful lever for promoting higher domestic demand. Despite international criticism and political declarations of intent, public investment in Germany has only increased moderately over the past two years and has remained average, at best, on an international scale. In the coming years, however, public investment is expected to grow significantly. The current investment plans for the federal budget are 40% higher than those adopted in 2013. Public contracts for the construction industry in 2016 were between 15 and 27% above the average of the previous 10 years. The excellent state of the public finances at the various government levels also supports the prospect of increasing investment growth. However, severe capacity shortages in the construction industry are likely to mean that the high demand for investment will not quickly lead to an increase in construction activity. (Further articles: German housing market, Corporate bond boom in Germany, Result of the Saarland election) [more]
55
April 4, 2017
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In the current debate about the future of the EU, politicians as well as the media are warning of a tendency by member states to shift their focus back to their own national interests and of a subsequent loss of significance of the EU. Are policymakers reacting to actual changes in the attitudes of EU citizens or is there an underlying perception issue here? [more]
56
March 23, 2017
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With developments in the UK and the US, populism was a key theme in 2016. But does the perception of 2016 as “the year of the populists” really fit for Europe? A closer look suggests that while populism was an omnipresent theme in public discourse, support for populist parties in polls rather remained stable and elections did not translate into outright populist wins. The rise of populist parties has however been a multi-year trend. Populists can affect national politics in various ways. One possible effect is that forming a government (coalition) often gets more complicated and time-consuming and results in more fragile governments. Another is populists’ potential impact on policy discussions’ style and content. Pursuing policies with long-term benefits but which are often not instantly popular becomes more difficult ‒ both at the national and the European level. [more]
57
March 9, 2017
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At face value the pick-up of GDP growth at the end of 2016 (Q4: +0.4% qoq vs. +0.1% prev.) seems to fit with improving sentiment. However, given its composition we would argue that underlying growth was weaker than the headline suggests. We stick to our below consensus GDP forecast for 2017 (1.1%) and only make cosmetic changes in the details. We are raising our inflation forecast slightly overall for 2017, from 1.6% to 1.7%, compared with only 0.5% in 2016. We still expect core inflation to be only slightly above 1% in 2017. If the signs of global price increases are confirmed, then we could in fact see a more pronounced increase in core inflation, particularly if rising prices translate into second-round effects when wage negotiations are conducted in 2018. (Further articles: German industry, German election campaign) [more]
58
February 21, 2017
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Securitisation markets have returned to policymakers’ attention recently, only this time as a hoped-for panacea to anaemic lending in Europe rather than a culprit for the financial crisis. To date, the focus is largely on true-sale securitisation. Yet synthetic securitisation has notable potential as well, especially for SME lending. Synthetic securitisation saw mixed trends in recent years. 1) Complex arbitrage deals have almost disappeared. 2) Balance sheet synthetic deals have surged to an issuance volume of EUR 94 bn in 2016. Transactions have become mostly private, yet are now much less complex and of robust asset quality. A firm inclusion of balance sheet deals in the evolving framework for simple, transparent and standardised (STS) securitisations would be sensible and could well contribute to a recovery in lending in Europe. [more]
59
February 14, 2017
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In 2016, electric cars and hybrids represented only 1.8% of all new passenger car registrations in Germany. It therefore remains a niche market – despite the introduction of subsidies last year. The average car buyer steers clear of electric vehicles because of high purchase costs, uncertainty about resale value and battery life, limited range, a lack of charging stations and lengthy charging times. This reluctance to buy presents the automotive industry and the state with a dilemma: strict CO2 limits for new vehicles mean that the industry has to invest heavily in electric-car technology, but it cannot expect an equivalent payback in terms of revenue in the foreseeable future. For the state, it can come down to a straight choice between granting expensive subsidies or failing to reach climate change targets. [more]
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