Germany Monitor

The total passenger volume at German regional airports decreased steadily from 2010 to 2014. In a longer-term comparison, the volume in 2014 was barely 5% higher than in 2005. During the same period, the larger German airports experienced growth of 25.6%. The range of flights available at most regional airports remains small. Therefore, the anticipated positive effects on the local economy are small, as are the transport benefits. With few exceptions, regional airports have been in the red for about the past ten years. In 2013, for example, none of the airports discussed in this paper was able to show a profit. Looking ahead, we remain sceptical with regard to expansion plans at regional airports. It would still be preferable if the federal government were the competent authority on the fundamental question of whether and where airport capacities should be expanded. [more]

The time is ripe for established banks to transform themselves into digital platform-based ecosystems. With their current digital strategies the banks will not achieve the resounding success that will enable them to hold their own in the medium to long term. Not only certain business models, distribution and communication channels, products, services and processes, but especially the ways data are handled need to be rethought and redesigned. Implementing a fundamental reform attuned to the digital age will provide the opportunity for traditional banks to learn and adopt the strengths and particularly the monetarisation strategies (walled gardens) of the successful digital ecosystems. [more]

The period up to 2025 offers the German steel industry good prospects for a stable and economically sound future. However, this requires policymakers to take a reasonable approach to the further development of the regulatory framework for steel producers and their customer industries in Germany just as it requires only a modest level of expansion in steel capacity at global level. There are also other conceivable scenarios with greater risks, challenges and consequences for the German steel industry and its employees – and these alternatives are in no way completely improbable. [more]

At sectoral level, the positive effects of the euro's current weakness are clearly outweighing its drawbacks. Capital equipment manufacturers are benefiting the most from the increasing price competitiveness offered by Germany as a business location. In 2014, the automotive industry generated 45.5% of its total revenue from non-EMU countries, while the proportion for the mechanical engineering sector was almost 43%. Parts of the electrical engineering, chemicals and pharmaceutical industries are also especially benefiting from the recent devaluation in the euro. [more]

Biotechnology is one of the key technologies for securing Germany's position as a manufacturing location. While biotechnology research in Germany is being conducted at the leading edge and grants make it easier to set up a biotech firm, young companies often encounter funding bottlenecks when the start-up financing phase comes to an end. One indicator of how grave the funding situation is in Germany is that the average amount of venture capital available to a company is around four times as high in the US as it is in Germany. This funding gap could jeopardise Germany's high-tech strategy objective of beefing up key technologies in the domestic market. [more]

While the German economy is generally getting a growth boost from the slump in oil prices, the oil-producing countries are seeing their economic prospects deteriorate. This could bring pressure to bear on German goods exports to these countries, which totalled no less than EUR 73 bn in 2014 (export share: 6.4%), and trigger a 10-15% nominal decrease in 2015. The sectors in Germany that have particularly benefited so far from the oil producers' "petrodollar recycling" include mechanical engineering and other transport equipment (mainly aircraft). In these cases, both the export ratios and the shares of the oil countries in total sector exports are above average. [more]

Germany's service sectors have shown themselves to be keener to invest than industry in recent years. The net fixed assets held by the service sectors grew by almost 28% in real terms between 1995 and 2012, although their growth rate has slowed over time. By contrast, the capital stock in the industrial sectors has shrunk by 1.6% in real terms. While, on the one hand, politicians in Germany have been expressing regret or even voicing criticism over the country's current lack of capital spending, on the other they have recently introduced measures (such as their policies on pensions and labour markets) that are hampering investment in Germany rather than stimulating it; this approach is inconsistent. [more]

The financial crisis has led to substantial reforms of the system of financial regulation and supervision in Europe – not limited to but including deposit guarantee schemes (DGSs), which play a key role in consumer protection and financial stability. The most recent DGS reform follows a gradual approach, i.e. focuses on adapting existing national systems rather than replacing them. Nevertheless, new rules for bank resolution and the emerging Banking Union are considerably changing the environment DGSs operate in. Given the complexity of the new setup, cooperation between the different players in the financial safety net – including DGSs – is indispensable. [more]

The integration of road transport into the EU Emissions Trading System (EU ETS) using an upstream approach (with refineries and fuel importers as participants) is superior to the instrument of CO2 limit values for cars on the counts of ecological effectiveness and macroeconomic efficiency. This applies in particular if a cap on CO2 emissions enjoys top political priority. Higher taxes on fuel would also be more appropriate than a further tightening of limit values after 2020/21. Nonetheless, if policymakers should decide that (stricter) CO2 limit values for cars are to remain the instrument of choice after 2021, it would be appropriate to gear them to the (lower) targets in other large auto markets. [more]

German engineering firms must prepare to confront several trends over the medium term. The first of these is that a new, bipolar world of engineering markets is emerging. The United States and (once again) China are set to become especially promising centres of growth going forward. Further future trends are, secondly, the gradual shift in product focus towards customised system solutions; thirdly, the growing importance of not purely price-related competitive factors; and fourthly, the reconfiguration of the global division of labour in the engineering sector as the classic distinction between producer countries focusing on standard machinery and others focusing on speciality equipment becomes increasingly untenable. Provided that traditional suppliers to the manufacturing sector manage to spot the new mega-trends in good time, they will be able to build on these to develop promising strategies that enable them to adapt, survive and – ultimately – grow. [more]