Talking point
EU climate targets: High degree of flexibility highlights conflicts within the EU
The climate targets recently adopted by the EU show a high degree of flexibility. This reflects the conflicting interests and the heterogeneity of the EU member states, for example in terms of energy generation or degree of industrialisation. However, the pronounced flexibility is not necessarily bad news. The fact that the EU intends to rely also in future on revitalised EU emissions trading as its main climate protection instrument is to be welcomed. Compared with other countries – such as the United States or China – the EU committed itself early on with an ambitious CO2reduction target of at least 40%. [more]
Hot off the press
German industry: Output growth to remain shy of 1% in 2015
Following weak performance in winter half-year 2014/15 industrial production in Germany is likely to return to a moderate uptrend in the course of 2015, resulting in expansion of roughly 1.5% in real terms in 2014 and about ¾% in 2015. This means the generally muted dynamics of industrial performance in evidence since 2011 would continue in 2015. Industry's share in total German gross value added (2013: 21.8%) will probably decline again, as in 2012 and 2013. The only moderate growth of industry is primarily attributable to the currently subdued level of business activity and external shocks. Nonetheless, structural factors are going to regain importance. The ball is now in the politicians' court. Many of their recently adopted measures give rise to fears that Germany's international competitiveness as an industrial location is likely to decline. [more]
Higher German inflation: Mission impossible?
Why are German wages/inflation not responding? Much of the answer lies in cultural factors and personal traits which manifest themselves in a high aversion to inflation. This in turn has led to Germany’s unique economic fundamentals and institutions. At the core it seems that Germans and German society can handle distribution conflicts involving time inconsistency problems better, on average, than many other nations. Given the German peculiarities the ECB has more time to run its supportive policy without creating new imbalances in the largest EMU economy. Therefore the ECB has scope to extend its balance sheet via private and most likely public QE.  [more]
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