English version of ˮDer digitale Euro: Politische Ambitionen treffen auf ökonomische Realitätenˮ

While digitalisation does promise significant additional prosperity, it also threatens to lead to higher inequality. A major automation wave or increasingly capital-intensive production would reduce the overall wage share and raise corporate and capital income. According to our scenario analysis, the EU countries would, on average, have to deal with a huge annual fiscal deficit if automation dramatically reduced employment. It is uncertain how digitalisation will affect the demand for labour and the public finances. Nevertheless, governments should try and prepare their countries for the future, for example by paying more attention to education policy and adapting the international tax system to the realities of the 21st century, for example in the field of corporate taxation. [more]

Since the rally in 2017, the buzzwords bitcoin and blockchain have been omnipresent in the public. Still, the understanding of how much potential the technology actually offers is often rudimentary. To shed more light onto the discussion, we discuss the manifold technological facets as well as the social changes that might come on the heels of the technology. After outlining the utopia, we point out the technical as well as the social hurdles that are standing in the way of the revolution. [more]

With digitalisation becoming an ever more common feature along the value chain, the German industry looks set to enjoy higher potential growth in the coming years. The additional gross value added in German manufacturing might total EUR 70–140 bn for the years between 2018 and 2025. As a rule, the industrial sector is in a better position than numerous (personal) services sectors to benefit from the favourable impact of digitalisation. Traditional capital goods producers, such as the auto industry or mechanical and electrical engineering, are likely to see their gross value creation benefit more strongly from digitalisation than the metals or chemicals sector. [more]

During the last few years, the expansion of digital infrastructure in the EU has been carried out more slowly and less comprehensively than politically intended. The EU’s objective of ensuring fast broadband coverage of more than 30 megabits per second for all Europeans by 2020 seems out of reach. There are economic and regulatory reasons for the insufficient progress with digital infrastructure improvements. However, inadequate digital infrastructure puts companies at a disadvantage versus US competitors, but increasingly also versus Chinese players. The European Commission estimates that more than EUR 500 bn will need to be invested by 2025 to achieve the goal of a “gigabit society”. [more]

Investors have long attempted to incorporate ESG information into their stockpicking decisions, however, ESG funds have underperformed the market. This issue shows how the latest developments in artificial intelligence and machine learning are finally giving investors the upper hand. Big data catches out ‘greenwashing’ and provides forward-looking market signals that outperform the market. This is a boon for investors who want to determine how ESG issues affect the fair value of stocks. [more]

The number of FinTech start-ups in Germany has surged in recent years. They are mostly active in crowd funding and payments. Online payment schemes offered by FinTechs or BigTechs have already become the most popular way to pay for internet purchases. Meanwhile, the biggest focus of blockchain start-ups in Germany is on financial services. Many FinTechs cooperate with banks which like them for their innovative solutions. [more]

With the new Payment Services Directive ("PSD 2") of the EU, which entered into force on 13 January 2018, payment services in Europe have become the frontrunner of "open banking". Account holders can request, free of charge, that banks transmit their financial data in digital form to third parties. Furthermore, they can authorise third-party providers to initiate payments from their bank account. Personal data are owned by the data subject – this principle also forms the basis of the new General Data Protection Regulation (GDPR). Under the latter, however, there is no obligation to provide a technical solution through which customers can transmit their personal data to third-party providers in a convenient manner. In contrast to the PSD 2, the GDPR is therefore unlikely to stimulate innovation and competition in payments. In the financial sector, competition will thus be distorted. Banks must grant competitors access to customer data and their payment infrastructure, whereas internet platforms, for instance, de facto retain sovereignty over the personal data of their customers as well as access to their platforms. [more]

Several aspects of the European data protection regulation GDPR could have far-reaching implications for competition in the EU’s data economy and the competitiveness of the bloc’s tech industry and AI startups. Data protection “made in Europe” could give European companies a competitive edge as users become increasingly privacy-aware. But GDPR could also end up rather strengthening the position of incumbent tech giants and throw the continent further behind the US and China in the emerging race for global AI dominance. If potential negative implications of the regulation for the EU’s data economy materialize, EU lawmakers should not hesitate to make adjustments accordingly. [more]

When reporting on bitcoin, blockchain and cryptocurrencies these days, the speaker is faced with the question: Shall he discuss the technology or move directly to the presentation of the social and economic implications? Conveying a complex technology in just a few minutes is risky. In Alice's rabbit burrow, the speaker and his audience quickly lose track of each other. But the audience may also be left clueless by the direct presentation of the potentially revolutionary implications. In the face of this dilemma and the complexity of cryptosystems, we will try to shed light on the issue by means of metaphors. We hope you will join us on our journey into the blockchain universe. [more]

Developments in artificial intelligence and robotics have far-reaching economic and sociopolitical consequences, with some of them already materialising today. Still, the implications of further progress in these fields are not well understood. Economies around the world are likely to be impacted differently by the diffusion of AI technologies and robotics as wealthy industrial countries might increasingly “re-shore” production. To forge ahead and maximise the benefits for economies and societies, a balance needs to be found globally between successfully promoting key technologies and industries and avoiding the risk of rising protectionism and "knowledge wars". As the pace of technological change and the related launch of new business models are unlikely to slow, the ability of the state and regulators to keep pace is challenged. [more]

Opinions differ when it comes to bitcoin. Discussions are triggered largely by bitcoin’s spectacular price increasess and are not very informed or nuanced. In this paper we focus on several standard claims, which we will put into context and, if necessary, rectify. This will hopefully help our readers to familiarise themselves with the topic. [more]

The rise of bitcoin and other cryptocurrencies and the decline in cash payments are the background for a new concept: digital cash issued by central banks. An old academic debate about who creates money and how is resurfacing, but what about the user’s perspective? Why would we use crypto euros? Such digital cash would compete against bank deposits, physical cash and private cryptocurrencies to win over consumers in the areas of payments and savings. [more]