Talking point
Blockchain – attack is probably the best form of defence
Debate over blockchain technology is raging in many online and offline media at present. In principle, the technology constitutes a decentralised ledger system that can be coordinated via peer-to-peer (P2P) networks. Any ownership or security issues arising in connection with the decentralised transactions conducted across the ledger system are handled by P2P mechanisms as well, i.e. also without a central node. Ownership status is established via the digital exchange of cryptographic keys (public vs private), while fraudulent transactions can largely be ruled out with the help of the cryptographic "proof of work" system. Using a proof of work, blockchain technology enables the rapid, inexpensive transfer of assets and financial products between individuals who neither know nor trust one another, without a compelling need for an intermediary to reduce existing information asymmetries. [more]
Hot off the press
Subsidy cuts in the UAE - A model for the GCC?
The announcement of the United Arab Emirates on July 22 that they would deregulate petrol and diesel prices from August 1 caused a minor sensation. It makes the federation of seven emirates the first amongst the Gulf Cooperation Council (GCC) governments to cut politically sensitive fuel subsidies long called for by the IMF and other observers. While subsidy cuts are an important step for fiscal consolidation and economic development in the UAE, the pressure to lift subsidies is even higher in several other GCC countries. However, Gulf monarchies have been reluctant to change their established oil wealth distribution systems which are one of their main policies to maintain social stability. Gulf peers will be monitoring the implementation and public reception of subsidy cuts in the UAE very carefully. If successful, the Emirates’ move might not only serve as a regional role model for economic diversification but also for fiscal reform. Faced with substantially lower oil revenues, GCC peers might see themselves encouraged to follow suit, also as understanding of the local population for energy price deregulation may increase. However, who will follow when and how can be seen as a function of fiscal urgency and political costs.  [more]
Germany
Focus Germany: Cracks in the foundation?
German model – has a consensus economy reached its limit? German output growth poised to outstrip potential again in current year. Despite new government spending programmes there should be continued budget surpluses for the time being. Given the strengths of its institutional framework Germany has so far largely been able to avoid the possibility of distributional conflicts feeding through in the shape of higher government deficits and/or rising inflation. Demographic developments, not least, will probably put this resilience to the test. However, a new reform thrust is needed in view of decreasing locational advantages. It remains to be seen whether society will carry through with an update of the Agenda 2010 reforms. [more]
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