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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.

310 (171-180)
September 1, 2015
Region:
GDP growth accelerated slightly to +0.4% qoq in Q2 with disappointing details. The domestic economy was a drag due to the decline of investments and an inventory reduction. Consumption slowed. Net exports were the major growth engine. German exports benefitted from the weaker EUR and strong demand especially from the US. We cut our Q3 GDP growth forecast slightly to 0.4% qoq. Despite this downward revision, we modestly increase our 2015 GDP forecast to 1.7% due to the marginal upward revision of H1 numbers, and changes in the growth composition. Fundamentally our outlook remains unchanged. Domestic demand, esp. private consumption, is the primary growth driver and the external environment remains challenging. [more]
171
August 27, 2015
Region:
Analyst:
What is the story with the carbon bubble? How great is the risk of conventional energy company valuations plummeting on account of ambitious climate protection policy? There may be many reasons for investors to channel less money into "fossil fuel companies" than before or to abandon them altogether and opt for other types of investment instead. However, one should not put too much stock in the reason being an ambitious, reliable and internationally comprehensive climate protection policy or a global decline in demand for fossil fuels. A carbon bubble is an unlikely development in such an environment, especially since the evolutionary nature of climate protection policy and technological changes in the energy sector offer the respective companies opportunities to adapt over time. [more]
172
August 13, 2015
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Analyst:
In March 2015, the 28 European Heads of State and Government committed themselves to creating an Energy Union. In principle, the commitment to even stronger cooperation on energy and climate issues is a step forward, even though the decisive impetus came from grave concerns about potential gas supply disruptions as a result of the conflict between Russia and Ukraine. The current discussion also indicates that the Energy Union should initially focus on the further improvement of natural gas supply in Eastern Europe. The further development of infrastructures and markets for grid-based energies are likely to become target areas as well. By contrast, contentious topics such as the nuclear phase-out in Germany and country-specific subsidy programmes for renewable energies are unlikely to be a target area yet. We thus expect an incremental policy of small steps, i.e. by no means a rapid and radical transformation of the European energy sector as a whole. [more]
173
August 11, 2015
Region:
Analyst:
Given the merely average state of communications infrastructure in Germany today, this country could fall behind in the international competition to attract investment. This worry is exacerbated by the fact that even within Germany there is a risk of a significant gulf developing between the regions. However, while broadband expansion is indeed making progress in the densely populated regions, major challenges exist in rural regions with respect to return on investment. When it comes to bridging systemic profitability gaps, the government will have to step into the breach if such projects are also to progress. The funding additionally earmarked in the federal budget and the revenues currently generated from "Digital Dividend II" should provide stimuli for expansion. However, despite government aid it must always be clear that broadband expansion can only be profitable in the first place if modern networks are complemented with modern services. [more]
174
August 7, 2015
Region:
It is the classical dilemma of any currency union that a single monetary policy cannot possibly be appropriate for everybody if members are at very different stages of the business cycle. To get a feel for the scale of monetary (mis-)alignment, we calculate central bank rates as implied by a modified Taylor rule. [more]
175
July 31, 2015
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Analyst:
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]
176
July 31, 2015
Region:
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]
177
June 29, 2015
Region:
While the core inflation rate has remained relatively stable since 2011 at an average of slightly above 1% yoy the oil price slump is the main reason for the temporary decline in consumer prices at the start of 2015. However, the oil price rise of some 30% since January and the stabilisation of the EUR exchange rate sent the German inflation rate out of negative territory after just one month and then made it accelerate to 0.7% yoy recently. We therefore expect slightly stronger increases in consumer prices of 0.5% this year and 2.0% in 2016. With our forecast the risks are more pronounced to the downside. The oil price might rise more slowly than expected on account of the global oversupply. In addition, the EUR/USD has now stabilised at above 1.10 after hitting its low in mid-April. Our forecast assumes EUR/USD parity by year-end. [more]
178
June 26, 2015
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Analyst:
The average age of cars on German roads hit a new record high of nine years at the beginning of 2015. The primary reason for this is the improved quality of vehicles. Although the diesel share of new car registrations has averaged well over 40% in recent years, diesel only constituted 31% of the cars on German roads at last count. The durability of cars is causing the mix of cars in service to change only slowly. The diesel car example suggests that it may take many years before cars powered by alternative technologies constitute a major share of all the cars registered in Germany. The vision of a future with largely climate-neutral or locally emission-free vehicles on German roads by 2050 is virtually unattainable as things currently stand. [more]
179
June 22, 2015
Region:
Germany was an attractive destination for migrants in 2014 for the fifth year in a row. The net migration balance climbed again by roughly 20% on the year and clearly exceeded the 500,000 mark for the first time since 1992. Roughly 1.4 million persons immigrated to Germany, the second highest total in the last 65 years (1992: 1.5 million). Since the beginning of the sovereign debt crisis in the eurozone in 2010 a net 1.7 million persons have migrated to Germany, so despite a shrinking domestic population the total population has expanded by approximately half a million. [more]
180
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