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Statement — 4 March 2024

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. 

Statement — 18 January 2024

ifo Viewpoint 257: The Climate Bonus: An Ineffective Tool

In the ongoing debate over climate protection and rising CO2 prices, there is a growing demand to redistribute CO2 pricing revenues directly to citizens, instead of channeling them into government spending programs. In Germany, a popular tool has been proposed for this purpose: the “Klimageld” or climate bonus. This concept involves returning the CO2 pricing revenues to the public as a uniform per capita amount. 

Statement — 9 January 2024

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. 

Statement — 1 January 2024

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.

Statement — 20 October 2023

ifo Viewpoint 254: Germany as an Industrial Location

The German economy is currently in a difficult situation. Germany is the only one of the G7 countries that expects a shrinking gross domestic product in 2023. The Economist magazine asks whether Germany is once again the “sick man of Europe,” similar to in the late 1990s. The end of Russian gas imports through Nord Stream as well as rising energy prices have prompted energy-intensive industries in Germany to scale back production. Several companies want to relocate sites to countries with lower energy prices. All this has led to a debate about whether Germany is under threat from deindustrialization.

Statement — 11 October 2023

ifo Viewpoint 253: Should the German Minimum Wage Increase to EUR 14 Now?

When politicians introduced the statutory minimum wage in Germany, critics warned that it might become the subject of a bidding war in election campaigns. The solution was a commission formed by representatives of trade unions and employers to propose minimum wage increases, based on the index of collectively agreed wages. The minimum wage was to follow general wage trends, not the other way around, and for a few years this worked well. But during the 2021 federal election campaign – when the minimum wage was EUR 9.60 per hour – some parties called for an increase to EUR 12. The traffic light coalition implemented this demand in 2022.

 

 

 

Statement — 28 September 2023

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? 

Statement — 14 September 2023

ifo Viewpoint 251: The Equity Pension – How It Can Mitigate the Demographic Problem of German Pension Insurance

Demographic change poses major challenges for German pension insurance: if fewer and fewer contributors face more and more pensioners, contribution rates will have to rise or pension benefits will have to fall. If the aim is to avoid both these outcomes, the pension fund will have to be supported from outside. Up to now, this has been done primarily through subsidies from the federal budget – a method that is increasingly reaching its limits. The German government now wants to help stabilize pension finances with what is known as the equity pension.

 

 

 

Statement — 14 August 2023

ifo Viewpoint 250: Can Economic Growth and Ecological Sustainability Coexist?

Is long-term economic growth compatible with ecologically sustainable development? This question stands as one of the most debated issues of our time. Over the past decades, growth driven by economic liberalization and globalization has brought prosperity to billions and reduced global poverty. However, this positive trajectory has come at a high cost to the environment and the depletion of natural resources. The limitations of economic growth at the expense of the environment are evident. Sustainable economic prosperity can only be achieved in the long run if it is coupled with ecological sustainability.

Statement — 13 June 2023

ifo Viewpoint 249: Four-Day Work Week? No Longer in Keeping with the Times!

Debates about the number of working days per week are nothing unusual in Germany. In the 1950s, the six-day week was the norm until the unions pushed through the reduction of working hours with the slogan “On Saturday, daddy belongs to me.” After many decades in which the five-day week was the norm, Germany and other countries are now intensively discussing the introduction of a four-day week.

Statement — 15 May 2023

ifo Viewpoint 248: The Energy Efficiency Law – A Growth Killer?

Germany’s energy policymakers are currently in the process of passing what’s known as the Energy Efficiency Act. In doing so, they are following the requirements of an EU directive. Contrary to the name, this law does not primarily regulate energy efficiency; rather, it caps the country’s total energy consumption. Final energy consumption is to be reduced significantly by 2030: by 26.5 percent compared with consumption in 2008, and by around 22 percent compared with today. It does not matter whether the energy comes from climate-neutral sources (such as wind or sun) or from fossil fuels.

Statement — 12 April 2023

ifo Viewpoint 247: The German Economic Model – Decline or Second Economic Miracle?

What is the future of Germany’s economic model? The Russian attack on Ukraine has triggered a debate about the further development of prosperity in Germany. 

Statement — 4 April 2023

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. 

Statement — 24 March 2023

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.

Statement — 21 March 2023

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.

Statement — 13 March 2023

ifo Viewpoint 243: Higher Wages May Help Overcome the Shortage of Skilled Workers!

There is currently intense debate in many countries about a shortage of skilled workers. For instance in Germany, despite record employment figures, according to surveys by the ifo Institute, close to 50 percent of companies say they are constrained by a shortage of skilled workers ¬– also an all-time high. From an economic perspective, there is a simple answer to shortages: higher prices.

Statement — 11 November 2022

ifo Viewpoint 242: Wanted: Geoeconomic Strategy for Trade Relations

The planned investment by the Chinese state-owned group Cosco in HLLA, the operator of the Port of Hamburg, has triggered a fierce dispute. Critics of the investment argue that the Chinese government would gain unwanted control over the port facilities. Supporters, meanwhile, maintain that it is only a minority stake and that the German government is in a position to impose conditions on port operators, regardless of who the owner is.

Statement — 21 October 2022

ifo Viewpoint 241: Europe Must Avoid a Subsidy Race

The energy crisis – especially the shortage of gas due to a loss of supplies from Russia – is plunging Europe into recession and causing social tensions and distributional conflicts. European governments are eagerly seeking ways to defuse the situation, but they will succeed only if they cooperate closely. The cross-border energy market must remain open, and the European Union should leverage its market power when purchasing gas in third countries. But without coordinated national crisis-management strategies, Europe’s response could become a self-defeating subsidy race.

Statement — 12 August 2022

ifo Viewpoint 240: The ECB’s Toxic Bond-Purchase Program

It is unclear why the European Central Bank has introduced a new asset-purchase instrument instead of using its existing Outright Monetary Transactions facility. By shielding countries from both market forces and political commitments, the Transmission Protection Instrument risks destabilizing European monetary union.

Statement — 9 August 2022

ifo Viewpoint 239: The Government Should Stay out of Wage Policy — Supply-Side Reforms Make More Sense in the Fight against Inflation

How can inflation be contained in Germany? Wages are currently playing a major role in this discussion. Trade unions point out that the current inflation rate of more than 8 percent is reducing employees’ real incomes.