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. 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 No. 203: Tax-Cut Time for Germany?
ifo President Clemens Fuest is in favor of reducing corporate taxes in the current ifo Viewpoint.
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 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. 175: How to deal with Brexit
The vote for Brexit was a resounding slap in the face to the so-called political and economic elites in London, Brussels and across Europe from British voters. It is not easy to react in an appropriate manner in such cases. Like other fits of anger, the Brexit was caused by a mixture of irrationality and rage over real problems. It was irrational because exiting the EU will significantly damage Britain’s economy. Although many Brexit voters live outside the affluent centres that benefit most from the EU internal market, they are nevertheless harming themselves with this vote. Falling tax revenues will inevitably lead to cutbacks in nationwide public services like schools and healthcare via the NHS, as well as slower pension increases. This irrationality was fuelled by a Leave campaign that deceived many voters by spreading absurdly false information about the EU in some cases, wildly exaggerating costs of immigration and making unrealistic promises. This was only possible thanks to the poor organisation of the Remain campaign, which featured spectacular failures not only on the part of David Cameron, but also by Labour Party leader Jeremy Corbyn, who refused to make a determined stand for the EU, because it isn’t socialist enough for his liking.
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. 209: Reform of Property Tax Is Unnecessarily Complicated
Following lengthy negotiations, the federal and state governments in Germany have agreed to a reform of property tax, and the Bundestag has now enacted the reform. The debate centered on two concepts: an area-based tax and a value-based one. In the end, it was agreed to use value as the basis for measurement.
ifo Viewpoint No. 192: Hundred Year High Inequality in Germany? – A Fairy Tale Based on Selective Perception
Wikipedia defines selective perception as a psychological phenomenon whereby only certain aspects of the environment are perceived while others are blanked out. And this definition perfectly describes the current debate on inequality in Germany. The only facts and half-truths widely perceived and publicised by the media are those supporting the argument that there is a steadily growing gap between the rich and the poor. Other facts, which show that inequality is falling, are ignored because they do not fit in with the simple, easy-sell story of a growing divide.
ifo Viewpoint 214: Neodirigism
Bank failures, economic inequality, populism, train delays, lack of housing, pollution – all this is laid at the feet of neoliberalism. Neoliberal policies are often named as a cause of social and economic grievances. The term actually refers to a historical school of though that, in response to the world economic crisis of the late 1920s and early 1930s, demanded not less but rather more government action to establish conditions that would improve the functioning of the economy. However, people who use the term nowadays are usually referring to a disproportionate faith in the market and the state’s withdrawal from areas where it is actually needed.
ifo Viewpoint 235: Broad Tax Cuts for Gasoline Are the Wrong Way to Go
In view of drastic rises in energy prices, there are increasing calls for governments to shield citizens from the burden. The French government has announced that it will reduce gasoline tax by EUR 0.15 per liter for four months starting in April. In Germany, there is criticism that the government is earning money from the increase in the price of gasoline via VAT. The claim is that the additional revenue should be returned to the citizens. Some are calling for fuels to be subject only to the reduced VAT rate of 7 percent. Since VAT rates cannot be changed at will due to European law, German Finance Minister Christian Lindner wants to introduce a gasoline rebate – people should submit fuel bills to the tax office and get a portion refunded.
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 246: The Current Banking Quake: Where Does It Come from and What Should Policy Makers Do?
The crises at Silicon Valley Bank and Credit Suisse have shaken the world of finance. While policymakers and central banks are being placatory, the markets are not calming down. Banks that very recently seemed healthy are running into liquidity problems.
ifo Viewpoint 219: Collective Bargaining in the Public Sector
On October 22 and 23, collective bargaining in the public sector will enter its third and possibly decisive round. The trade union ver.di is demanding 4.8 percent more pay, or at least EUR 150, for federal and municipal employees. While collective wage settlements apply only to salaried employees in the first instance, they are usually also adopted for civil servants. What should we make of this demand – and what is an appropriate wage settlement in the current situation?
ifo Viewpoint No. 196: Italy’s New Government: Transfer Union or Euro Exit
The Five Star Movement and the Lega Nord promised Italian voters massive tax cuts and increases in public spending in their election campaigns. How a country with a government debt ratio of 132 percent of its economic output was going to finance these promises was unclear though. Now the first draft of a coalition agreement between the two parties has been made public, explaining where the money is supposed to come from: namely from the purses of taxpayers in other Eurozone countries. If these countries don’t go along with the plan, the coalitionists wish to take Italy out of the Eurozone.
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. 184: What It Will Cost Us If Donald Trump Is Serious
Free trade? Open markets? Both no longer seem to be the order of the day. Instead 2016 and 2017 may well go down in economic history as the years that ushered in a drastic change in economic policy course and saw it veer towards protectionism. Things all began with the Brexit vote by the British, with the climax to date being the Americans’ decision to elect a president who openly favours isolation by voting for Donald Trump.
ifo Viewpoint No. 202: Germany’s new industrial policy
By laying out his national industry strategy 2030, German Federal Economy Minister Peter Altmaier has kickstarted an important debate. How is Germany’s future as an industrial location to be secured? Many see technological change, US dominance in digitalization, and China’s ascendency as a threat to traditional industrial countries like Germany. Is a new national industrial policy the right reaction? There are three fundamental problems with industrial policy. First, politicians know no more than private investors about which technologies will win out in the future. Second, they tend to be worse than the private sector at terminating failed projects in good time. And third, there is the danger that long-established, politically well-connected companies will abuse industrial policy in order to secure privileges at the expense of competitors, taxpayers, and consumers.
ifo Viewpoint 224: Central Bank Swerving from Its Path
The Executive Board of the European Central Bank (ECB) wants to make monetary policy “greener.” Hardly a week goes by without the topic being promoted by one of the board members. In addition to the visible effort to make the traditionally dry seeming monetary policy appear practically helpful and close to the people, the ECB’s activities in the matter itself amount to a further significant expansion of its competencies. This involves, first, independently assessing the environmental friendliness of projects financed by corporate bonds; and second, giving preference to positively rated projects in various securities transactions.
ifo Viewpoint 227: Advantages and Disadvantages of a Reform of the Marital Splitting System
The taxation of married couples in Germany has long been considered in need of reform. The current marital splitting system provides for married couples to be taxed jointly. There is always an advantage if the partners have different incomes. This is due to the progressive income tax rate: the tax rate rises with increasing income.
Ifo Viewpoint No. 176: Italian Banks Should Not Be Allowed to Sidestep Investor Bail-In!
Should Italian banks crippled by non-performing loans be bailed out at the taxpayers’ expense? For a long time this kind of bank bail-out was common practice. Germany is no exception to this rule. One of the lessons of the financial crisis was that bank losses must no longer be passed onto taxpayers. That is why the European banking union rules strictly limit state funding for ailing banks. It is only allowed after private investors have sustained losses amounting to at least eight percent of the balance sheet total. Exceptions are possible in a crisis, for instance, that poses a threat to the banking system of the Eurozone as a whole. This is not, however, the case with the Italian banking system.