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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.

259 Documents
February 25, 2020
Region:
Last week's special Council meeting on the next EU budget 2021-2027 ended without an agreement. When EU leaders left Brussels on Friday after close to 30 hours of negotiations, there was no timeline set for further talks. In our view, it would have been a surprise if the meeting had led to a big breakthrough, given the traditionally contested nature of negotiations between net contributors and recipients of the seven-year budget. This time, the situation is much more complicated, as Brexit leaves a sizeable gap of around EUR 60-75bn in the ~EUR 1tr budget. Still, despite the meticulous preparations of Council President Charles Michel, including a marathon of bilateral meetings with EU leaders ahead of the summit and a new compromise budget proposal, not even a preliminary agreement regarding the approximate size of the Multiannual Financial Framework (MFF) could be reached. [more]
1
February 10, 2020
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After very weak December data a small drop in Q4 GDP seems likely. Looking forward, the coronavirus provides a substantial risk for the expected global recovery, as hopes were pinned on an improvement of the Chinese economy. We assume that the corona outbreak will shave off 0.2pp of Germany's Q1 GDP, making a technical recession quite probable during the winter half. [more]
2
December 20, 2019
Region:
In 2019 we've been asked lots of questions about the German economy, politics – fiscal policy and the black zero, in particular – and, more fundamentally, about Germany’s future given the risk of a more permanent reversal of globalisation, the increased environmental focus, the challenges for the German car industry and the widespread notion that Germany might miss the boat on the big data economy and other technological trends. This is why we are also discussing these issues in this report. For 2020 we anticipate a gradual recovery in global trade, which should enable a piecemeal recovery in exports and help end the industrial recession. We expect equipment spending to decline in 2020. On the other hand, the domestic growth pillars – private and government consumption as well as construction – should continue to expand at a healthy clip. But annual GDP growth of 1% forecast for 2020 after 0.5% in 2019 is clearly underwhelming, especially since the acceleration versus 2019 is almost exclusively the result of an unusually high number of working days in 2020. [more]
3
November 4, 2019
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German exports and global trade have been moving in lockstep recently and more or less grinded to a halt in yoy terms. We found that the Bundesbank’s leading indicator for global industrial production leads German exports by 4 to 5 months. Recent declines in this indicator do speak against a recovery in German exports before the end of Q1 2020, despite recent signs of stabilization in German foreign order intake. (Also included in this issue: house prices in Germany, labour market, automotive industry and German politics) [more]
4
September 30, 2019
Region:
A new (green) 'fiscal deal' in Germany? The climate protection programme is no game changer for fiscal policies as it will be largely counter-financed by additional revenues. The ecological steering effect of the climate package is also limited since the initial carbon price will be low. Speculations that Germany will finally relent and embark on a decisive fiscal policy loosening have proved to be overplayed. We stick to our call that we will not see a fiscal package unless Germany enters a severe recession. Still, Germany’s budget surpluses are set to narrow considerably in 2019/20. (Also included in this issue: German labour market, industrial production, auto industry, the view from Berlin) [more]
5
August 22, 2019
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The digital transformation has enriched societal discourse through new forms of multilateral communication, but it has also amplified the spread of misinformation, echo chambers and propaganda, offering authoritarian states new means of surveillance and control. How democracies approach this challenge will be a key factor in their performance, given intensifying competition among political systems. [more]
6
August 19, 2019
Region:
We see Germany in a technical recession, as we expect another ¼% GDP drop in Q3. Our forecast for 2019 is now 0.3%. Given no indication for a rebound we lowered our 2020 forecast to 0.7%. We acknowledge these revisions do not properly account for the recent accumulation of risks. Given the increasingly fragile state of the global economy, the realization of one or more risks could easily push the economy into a completely different scenario, where growth revisions of a few tenths of a percentage point will not be sufficient. (Also in this issue: German automotive industry, chemical industry, house prices, corporate lending, the view from Berlin, digital politics.) [more]
7
July 8, 2019
Region:
In case of a snap election in Germany, a CDU/CSU-Greens coalition could be an option. Given both camps' radically different political positions in many areas, such a coalition would require both to make significant compromises. A black-green government would need to direct its focus and its available financial resources to climate protection and the energy transition. Corporates and consumers would have to bear considerable costs. This also spells a dilemma for fiscal policy. A larger share of government spending would necessarily have to be allocated to providing subsidies and mitigating the social impact of a quicker energy transition. Citizens and corporates cannot hope for major tax relief. (Also included in this issue: German goods exports, German industry, labour market, automotive business cycle.) [more]
8
May 23, 2019
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Results from the 23-26 May EU elections will not be published before late Sunday evening, final numbers not before Monday morning. Polls continue to indicate a loss of the conservatives' and social democrats' traditional majority while right-wing and left-wing Eurosceptics could gain more than 35% of the seats in the next EP. We do not expect any Council decisions on the next Commission President and other key positions before the June 20-21 summit. But negotiations between leaders on the EU's top jobs could last much longer and also a lengthy standoff between the Council and Parliament over the "Spitzenkandidaten" procedure cannot be excluded. [more]
9
May 21, 2019
Region:
Digital taxation is currently a subject of intense debate and since large digital companies are widely thought to pay inappropriately low taxes, policymakers remain under pressure to act. However, all approaches which are based on the taxation of revenues instead of profits have major flaws. As digital services expand into ever new areas of the economy (‘smart everything’), the risk of a far-reaching, arbitrary taxation of entrepreneurial activities is increasing. Disruption, the buzzword of the digitalisation discussions, may become an issue in international tax policy, too. In addition to an (international) digital tax, minimum taxes are one of the concepts under discussion. [more]
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