Max Lay

The German government is shifting investments from the Special Fund for Infrastructure and Climate Neutrality (SVIK) to debt-financed spending under the sectoral exemption for defense spending. Without this shift, the 10 percent investment ratio would not be met. That’s according to an initial analysis of the federal budget presented by the Federal Ministry of Finance. “Overall, the government is not doing enough to cut back on non-priority spending and increase investment, which is why it has to resort to accounting tricks,” says ifo President Clemens Fuest.

The government not only offset the effects of fiscal drag in Germany between 2019 and 2023 but also provided relief, as a new study by EconPol Europe shows. “Overall, the relief effect of various income tax reforms between 2019 and 2023 was greater than the burden caused by fiscal drag,” says ifo researcher Max Lay. “The relief for taxpayers in Germany was around EUR 15 billion higher than from simply offsetting fiscal drag.”

Germany’s gas price brake will cost the country much less than expected. Last winter, the German government had earmarked EUR 40.3 billion for it in the Economic Stabilization Fund. According to the latest estimate by the ifo Institute, it will actually cost only EUR 13.1 billion – one-third of the original sum.

In the event of a sharp rise in unemployment in the United Kingdom, the welfare state cushions between 36 and 37% of all income losses. This is the result of an EconPol study that examines social security systems in the EU. “The social security systems in Scandinavia and Western Europe buffer their citizens’ income losses most comprehensively. In countries in Southern and Eastern Europe, however, crises lead to significantly higher income losses, and the same is true in the United Kingdom and Ireland,” says Mathias Dolls, Deputy Director of the ifo Center for Macroeconomics and Surveys. In Ireland, the cushioning of income losses ranges from 30 to 32%.

En cas de hausse importante du chômage, l’État social en France rattrape les baisses de revenus globales des demandeurs d'emploi dans une fourchette de 38 à 73%. En Belgique, c’est entre 52 et 73%, au Luxembourg entre 43 et 52%.  C’est ce qui ressort d’une étude d’EconPol sur les systèmes de protection sociale des pays membres de l’Union Européenne. « Les systèmes de prévoyance scandinaves et d’Europe de l’Ouest offrent la meilleure protection contre les conséquences financières du chômage. Dans les pays d’Europe du Sud et de l’Est ainsi qu’au Royaume-Uni et en Irlande, les crises économiques se soldent par des pertes de revenus sensiblement plus élevées », constate Mathias Dolls, directeur adjoint du Centre ifo d’enquêtes et de recherches en macroéconomie. 

The German government’s three relief packages will cost around EUR 135 billion for the 2022–2024 period. This corresponds to 3.8 percent of the country’s economic output in 2021, according to ifo Institute calculations. “That sum does not include the gas and electricity price brake, which is estimated at a further EUR 90 billion and which has not yet been passed by the Bundestag,” says ifo tax specialist Max Lay. He estimates the relief from the three packages at EUR 33.3 billion for this year, EUR 49.0 billion for next year, and as much as EUR 52.2 billion in 2024.