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Who is afraid of populists?

March 23, 2017
Region:
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]

14 Documents
December 15, 2016
Region:
1
Germany remains an anchor of steadiness with an undisputed role as leader in Europe and is the only country that comes close to being on a par with America. This story of success is based on many structural factors, some of which complement and mutually reinforce each other. We group them as follows: (1) Macropolicies focused on stability and growth (2) Institutions grounded in German ‘ordoliberalism’ (3) Global companies with unique structures (4) An equitable system of social security and cooperative social partners (5) A long-term perspective by companies and citizens with the willingness to forgo immediate reward – in our view the most important factor in the success. The combination of innovative, multinational companies, functioning institutions and highly skilled workers will, in our view, maintain Germany’s competitiveness and prosperity into the future. German politicians are therefore confronted with the increasing challenge of holding the eurozone together. However, if anti-euro movements gain the upper hand in key partner countries, thereby increasing the disruptive risks, there may be a reassessment in Germany of the euro’s costs and benefits. [more]
November 1, 2016
Region:
2
While European central bankers commend themselves for the scale and originality of monetary policy since 2012, this self-praise is increasingly unwarranted. The reality is that since Mr Draghi’s infamous “whatever it takes” speech in 2012, the eurozone has delivered barely any growth, the worst labour market performance among industrial countries, unsustainable debt levels, and inflation far below the central bank’s own target. While the positive case for European Central Bank intervention is weak at best, the negative repercussions are becoming overwhelming. This paper outlines the five darker sides to current monetary policy. [more]
June 23, 2016
Region:
3
What this victory for the Leave campaign ends up meaning for the future of Britain is debatable. What is not in doubt is that Europe without its brightest star will be a darker place. Adding to the gloom is the fact this was avoidable. Britain voting to go it alone mirrors a wider distrust in the European project – a manifestation of its weak economic situation. [more]
June 8, 2016
Region:
4
Over the past century central banks have become the guardians of our economic and financial security. The Bundesbank and Federal Reserve are respected for achieving monetary stability, often in the face of political opposition. But central bankers can also lose the plot, usually by following the economic dogma of the day. When they do, their mistakes can be catastrophic. [more]
November 13, 2015
Region:
5
The influx of refugees has raised net immigration to Germany to the record level of more than one million. Among the OECD countries, this trend could put Germany ahead of the United States, traditionally the No. 1 destination country for migrants. As a result, Germany faces the difficult − and costly – Herculean task of integrating the refugees and absorbing the supply shock to the labour market. At the same time, the refugees represent an opportunity for rejuvenating an ageing population in Germany, where there is a growing scarcity of labour and the threat of lower structural growth. In our outlined win-win scenario, successful integration offers Germany the opportunity to consolidate its position as Europe’s economic powerhouse and to increase its attractiveness as an immigration country. A sustained high level of net immigration will attenuate the decline of the trend growth rate brought on by an ageing population. Instead of moving closer to stagnation, the trend growth could still amount to 1% in ten to 15 years as well, which would also benefit social systems. [more]
May 28, 2015
Region:
6
Politicians should focus on an expansion of building activity in the major cities and conurbations in order to reduce the upside pressure on house prices. In the past few months there have been indications of easing activity in the construction sector. If this trend materialises, the pressure on house prices will intensify further. One possible cause of this development is capacity restrictions, and a lack of suitable skilled labour in the finishing trades in particular. An immigration law that specifically focuses on bottlenecks in the labour market could help to bring about some relief. If it becomes obvious over the next few months that construction growth is going to remain sluggish long term, rent control should not be implemented in the regions. [more]
December 5, 2014
Region:
Analyst:
7
Germany is constantly being accused of investing too little. Critics say this hurts Germany itself as well as other countries. This assertion enjoys broad support among (high-profile) economic researchers, international institutions such as the IMF and many lobbyists from the German business community. They see the extra public investment requirements running to 3% of GDP (per year!), with the going buzzword being the "investment gap". The government, in particular, has been called upon to significantly boost its investments in infrastructure. Even the disappointing GDP figures and lowered growth expectations of the past few months are now also being used to justify demands for a rapid increase in (public) investment. Hopes of growth stimuli for the neighbouring countries of Europe are playing a key role in many of these demands – especially at the high end of the demand scale. [more]
July 28, 2014
Region:
8
Germany has become the No. 1 destination country for migrants in Europe again and No. 2 in the whole OECD after the United States. The turnaround reflects the crisis in the EMU periphery as well as the (postponed) opening of the German labour market to citizens from the 10 Central and Eastern European countries that joined the EU in 2004 and 2007. The higher immigration should only temporarily obscure the negative effects from the introduction of a minimum wage and the retirement wave triggered by the "pension at 63" option. Given the economic recovery in the eurozone periphery the present migration surge is unlikely to last and ageing Germany’s demand for labour from outside the EU will increase. Therefore, Germany needs to shape up to encourage more pull-based immigration. This requires a skills-oriented migration policy as well as more flexibility in the labour market and at the company level. [more]
May 16, 2014
9
So far the West has chosen a reluctant approach in its attempt to contain Russia’s encroachment in Ukraine, refraining from economically or financially meaningful sanctions. The Ukraine crisis and further sanctions will not be inconsequential for the profile of the European recovery, but when looking at the distribution of costs, it seems that the West can afford to be tough towards Moscow. Obviously, the economic cost would be higher if Russian supply of energy to the West was jeopardized, but this would come at a very high price for Russia itself. [more]
February 24, 2014
Region:
10
With the New Year came a new Hollande pledging to build a New France. Still, most of the announcements made in January by the French President merely confirmed a prudent policy inflexion which started last year. Hollande is counting on the solemnity of the speech, putting economic reforms more firmly on the French political agenda. But the reforms are likely to be slow, and the transition will be costly in terms of growth. This will weaken France's reserves of political energy for European reform for many years. Actually, the structural hurdles to reform are more firmly entrenched in France than in Germany 10 years ago. Thus the adjustment is likely to be slower to yield any meaningful results on potential growth than in the German experience and a meaningful structural re-convergence of the two countries will be slow. [more]
December 16, 2013
Region:
11
The approval of the coalition negotiations by the SPD’s membership has finally paved the way for a grand coalition. In our view, the agreement that is to be implemented over the coming years will take Germany in the wrong direction and will reduce trend growth in two broad ways: through the partial reversal of the successful Hartz reforms, as well as through increasing the fiscal sustainability gap through pension-system give-aways. Instead of making Germany a more competitive location for business and preparing its society for the demographic challenges ahead, the coalition is on course to implement policies that will be seen as errors in the years ahead. Increased federal spending on education, research and development is not accompanied by cuts in less useful policy interventions. European policy remains caught in a catch-22 between a tangled mass of over-complex regulation and the lack of willingness – not only in Germany – to rapidly pursue a political union. [more]
December 12, 2013
Region:
12
International criticism of Germany’s current account surpluses has reached new heights. The persistent surpluses are often seen as worsening, if not causing, the European crisis by impairing the peripherals’ capacity to export. Still, even taken individually, most arguments put forward do not hold water. As there is little evidence that Germany is manipulating relevant parameters, one should accept that the surpluses are the result of individual decisions of largely private agents in Germany and abroad. Politicians and commentators may be unhappy with the result, but they should not blame Germany. Rather, they ought to insist that the peripheral countries continue to improve their own competitiveness. Higher minimum wages and rising social security contributions will be a burden for the domestic economy in the medium term and hence weigh on import growth. [more]