Team
The people behind the ifo Institute offer the very high level of expertise and experience needed to fulfill our research and service mandate.
ifo Viewpoint No. 213: Challenges of Negotiating a Free Trade Agreement between the UK and the EU
Now it is official: at the end of January, the United Kingdom left the European Union – and not in the hard Brexit some observers had feared but an orderly departure. That notwithstanding, Europe is already facing its next challenge. The exit agreement stipulates that the UK will remain a member the customs union and the common market until the end of 2020. By that time, The EU and the UK must have concluded a free trade agreement. If not, customs duties and other trade restrictions would enter into force. However, reaching such an agreement takes time.
ifo Viewpoint 231: Advice from Across the Ocean
It is not surprising that German politics is attracting much international interest. Germany is the largest economy in the EU, and the country has overcome the Covid crisis with some success. Above all, it is striking that German politics is characterized by moderation. Germany held an election in which moderate parties won an overwhelming majority. Populists from the right and left were able to score points at most in the new federal states, otherwise they did not play a major role.
Ifo Viewpoint No. 180: The Economic Consequences of Mr. Trump
Politicians across Europe are still reeling at the shock election of Donald Trump as US President. That is understandable. They nevertheless need to snap out of it and start thinking seriously about how Trump’s triumph will impact Europe both economically and politically. The question on everybody’s lips is: how much of his election campaign rhetoric will Trump actually attempt to turn into economic policy and how should Europe react? Although his policy proposals to date have been hazy on detail, a fairly clear picture of Trump’s position has nevertheless emerged in four key areas.
ifo Viewpoint No. 198: Tariffs on cars
The escalation of the conflict between the USA and its trade partners seems inexorable. In May 2018 Donald Trump commissioned the US Department of Commerce to investigate whether car imports constitute a threat to US national security. The US Department of Commerce points out that the share of cars imported into the US market has risen from 32 percent to 48 percent over the last 20 years. Between 1990 and 2017 the number of jobs in the US automotive industry fell by 22 percent. US firms accounted for only 20 percent of global research and development expenditure in the automotive sector, and for just 7 percent of car part production. It therefore seems very likely that the US government will argue that car imports pose a threat to national security. That is, of course, no more than an excuse to impose tariffs.
ifo Viewpoint 244: Europe’s Industrial Policy and the Response to IRA
Europe is seeing a renaissance in industrial policy. Industrial policy usually involves influencing an economy’s sectoral development by means of subsidies, partial state ownership of companies, or regulations. It can also include promoting mergers of companies to form national champions – large companies which are supposed to conquer the world’s markets with their governments’ support. It’s also common to bar foreign investors from taking over domestic companies that are deemed strategically important.
ifo Viewpoint No. 186: How Germany Can Cooperate with Emmanuel Macron to Reform the Eurozone
There were sighs of relief in Germany when France elected Emmanuel Macron as President, but his victory also triggered a debate over Macron’s reform plans for the Eurozone. His critics claim that Macron wishes to turn the currency union into a transfer union against Germany’s interests. His supporters, by contrast, are calling on Germany to support Macron, or face the spectre of a Front National victory in the next elections. Both positions are unreasonable. Macron should be given time to further develop and explain his proposals for Eurozone reform. At the same time – and despite Germany’s delight at the victory of an EU-friendly president in France and its willingness to work with him – it is not the task of the German government to ensure that Macron wins the next election. He is the only person who can make that happen.
ifo Viewpoint 252: An Interest Rate Cap Would Not Be a Good Idea
Currently, rising interest rates are making life difficult for borrowers. Anyone who has debts with flexible interest rates or wants to buy an apartment must expect interest rates of 4 % and more. Two years ago, it was often less than half that. The situation is similar for people who take out a loan to buy a car or who simply overdraw their account. In Austria, there have now been calls for the government to intervene and introduce an interest rate cap. Interest on overdrafts on a checking account should be limited to a maximum of 5 %, and the maximum interest rate for real estate loans should be 3 %. What are we to make of this?
ifo Viewpoint No. 204: How Serious Politics Must Counter Populism
ifo President Clemens Fuest opposes false political responses to populism. He outlines the four pillars on which liberal economic policy is based: A solid foundation (competition, open markets, private property, flexible prices and wages, personal responsibility), effective regulation, openness and diversity, and a strong welfare state.
ifo Viewpoint 229: The New German Government’s Economic Policy: Tackling National Tasks, Not Neglecting European and Global Challenges
Regardless of which coalition wins out in the end: Germany needs a government that is capable of tackling major economic and political challenges. These challenges are broader than the issues that dominated the election campaign. The economic consequences of the coronavirus crisis, demographic change, climate change, digitalization, European integration, and geopolitical change require decisive action and a willingness to change.
ifo Viewpoint 234: Economic Consequences of the Russian Invasion of Ukraine
The war in Ukraine is not only a military and geopolitical turning point. It is also changing the economic situation. This affects both the short-term economic trend and the medium-term prospects for growth and prosperity. The previously expected economic recovery will be weakened. There is a threat of stagflation, i.e., a combination of weak growth and high inflation. Monetary policy faces a dilemma: while interest rate hikes can curb inflation, they would further dampen growth.
Ifo Viewpoint No. 174: Refugees Will Not Lighten Germany’s Load but Deserve Its Support
Around one and a half million people immigrated to Germany in 2015, including many from Syria, who were fleeing from the civil war in their home country. Far fewer immigrants are expected to arrive in 2016, as other European countries have closed their borders and the Balkan route has also been blocked. In the face of this wave of immigrants, Germany’s population showed an amazing willingness to help people fleeing war and political repression. That was impressive. But what are the economic implications of the immigration wave?
ifo Viewpoint 256: Saving on Social Security Contributions? That Would Need a Comprehensive Strategy
The German Federal Constitutional Court’s ruling on compliance with the debt brake has sparked a controversial debate on how to limit new borrowing in the federal budget. The question of whether social spending, which accounts for half of government spending, should be cut is particularly controversial. Since categories of expenditure such as interest, defense, and public investment are either unchangeable or have high priority, it must be clear to everyone involved that curbing government spending without touching social spending is a difficult undertaking.
ifo Viewpoint No. 193: Is the Grand Coalition Leading Germany towards a Transfer Union? The Euro Junktim
The CSU/CDU and the SPD are currently coming under fire for seeking to turn the Eurozone into a transfer union. Firstly, criticism is directed at their plan to enshrine the ESM euro bail out mechanism in EU law. This raises the question of whether the German veto on bail-out credit for countries with financial difficulties will be weakened. Secondly, the coalition wants to create a new fund conceived as the starting point for a future investment budget in the Eurozone. Although the coalition partners also say that the principle of linking control to liability in the Eurozone will continue to apply in the future, this is cold comfort. This principle has already been greatly weakened: not only through the bail-out credits granted to Greece that probably will never be repaid, but primarily through the TARGET balances in the ECB System. Via TARGET, Germany has granted other Eurozone countries interest-free credit worth over 900 billion euros for an undefined period of time. And this figure is rising. Germany urgently needs to scrutinise any uncontrolled increase in liability for other states. The grand coalition is doing just the opposite. It is moving in the direction of greater redistribution and joint liability. In line with these developments, Germany’s acting Finance Minister Peter Altmaier has signalled in Brussels that Germany would agree to a Eurozone deposit insurance scheme. He has warned that the volume of bad loans in the banking system needs to be reduced but this is not enough.
ifo Viewpoint 255: The Future of Germany’s Debt Brake
The recent ruling by the Federal Constitutional Court has reignited the debate over Germany’s debt brake mechanism. Amid growing calls for reform, some critics advocate its complete abolition, while others propose exempting investments from the debt brake. Let us examine these suggestions.
ifo Viewpoint 233: The Coalition Agreement – A Desire for Something New
Angela Merkel was said to be careful to manage expectations. Those who promise little need not fear criticism if nothing is achieved. The traffic light government is acting differently. Its coalition agreement is ambitious. It wants to massively accelerate the digitalization and decarbonization of the economy while preserving prosperity and inclusion.
ifo Viewpoint 258: A New Trump Era and Its Consequences
After the Super Tuesday primaries on March 5 at the latest, it will be a certainty: Donald Trump will be the Republican candidate for the US presidential election. What then? An election victory for the unpredictable politician in November would have far-reaching consequences for Europe and the rest of the world. Not only in terms of foreign and security policy, but also for international trade and climate policy.
ifo Viewpoint No. 197: Trade Disputes: Why Trump’s Position Is Much Weaker against EU than China
US President Donald Trump insists that his country is being treated unfairly by both the EU and China in terms of commercial trade. By this he means that European and Chinese companies and their employees live on exports to the USA, while Americans benefit far less from market access to Europe and China. This is why Trump is threatening to start a trade war. He sees himself as in the stronger negotiating position – he thinks that isolation would damage China and Europe more than it would the USA. This reasoning is not only flawed because imports of foreign products are extremely useful to the demand-side, which includes both consumers and companies.
ifo Viewpoint 245: Why a Reform of the German Corporate Tax System Is Urgently Needed
The current crises have led to a debate about the future of Germany’s business model and German industry. Rising energy prices, disrupted foreign trade, and the US IRA subsidy program raise the question of what needs to be done to maintain Germany’s competitiveness as a location for companies and highly productive jobs.
ifo Viewpoint No. 185: The Brexit Bill: A Useful Political Bargaining Chip not an Exact Science
At the start of the Brexit negotiations, EU chief negotiator Michel Barnier presented the British a hefty bill: exiting the EU will cost them 60 billion euros. Prime Minister Theresa May was “not amused” but has promised that her country will meet its obligations. What are these obligations? The European Treaties do not specify how a country’s withdrawal is to be paid for. Two approaches are currently being discussed. One can be called the “divorce” approach. An inventory of common assets and liabilities is determined, and each partner receives its share of net assets. In the case of the EU, net assets are negative. With the Brexit bill the British would assume their share of the net debt. The other is the “club-membership” approach. As long as you are a member you pay your membership fees; when you leave, it is only a matter of how long after having given notice you must make further payments. The assets of the club are not split up but are held by the remaining club members.
ifo Viewpoint No. 203: Tax-Cut Time for Germany?
ifo President Clemens Fuest is in favor of reducing corporate taxes in the current ifo Viewpoint.