ifo Media Center
The ifo Institute invites you to participate in the discussion of interesting economic topics via the Internet. In our ifo Media Center a whole series of remarkable events are available and can be viewed in full length. We also record selected speeches and presentations given by employees or at events and make them available in our Media Center.
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 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. 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. 183: Brexit Negotiations: Germany Must Make a Case for Free Trade with Britain
The time has finally come. In a few days the British government will formally declare Britain’s exit from the EU. The country’s EU membership is expected to end in March 2019. The terms of Britain’s exit and its future relations with the EU will be defined in the intervening period. If no agreement is reached, economic relations between the two parties will be governed by World Trade Organisation (WTO) rules. This would mean tariffs ranging from between five and ten percent on many goods, with far higher rates applying in some cases. Trade in certain services may even become impossible.
ifo Viewpoint No. 182: The Trump Tax: a Revolution in International Corporate Taxation
In recent weeks Donald Trump has repeatedly warned that foreign companies which distribute their products in the USA, but do not produce there, will be punished with an import tax of 35 percent. He has not yet explained how he plans to implement this tax. There are, however, strong indications that he may adopt a reform plan put forward by the Republican congressman Paul Ryan. Instead of customs duties, the plan outlines far-reaching reforms in the taxation of company profits. If implemented, the plan stands to revolutionise the international taxation system.
ifo Viewpoint No. 181: The Minimum Wage: Time to Take Stock
On 1 January 2015 a nationwide minimum wage of 8.50 euros per hour was implemented in Germany. As of January 2017 this wage will be raised to 8.84 euros. It is time to take stock. Although the debate over the minimum wage focuses strongly on its employment effects, the key question is how the minimum wage has impacted the wages actually paid in Germany. Average wages in Germany rose by 2.3 percent in 2015 versus 2014. In eastern Germany this increase amounted to 3.9 percent, and among unskilled workers it was as high as 7.9 percent. So the minimum wage seems to be working.
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. 179: EU Budget Reform: How to Spend It
What does the EU actually do with all of the money at its disposal? If you ask the ‘man on the street’ you get the following answer: most of the money goes to agricultural subsidies. Some people may also recall building site boards that refer to financial support from the EU’s regional and structural policy.
Ifo Viewpoint No. 178: Impact of Globalisation on Taxation
The globalisation of the economy raises basic questions for the financing of public spending. Capital, goods and a growing number of people are mobile across borders. Many companies can relocate their production facilities, jobs and immaterial assets like patents internationally.
Ifo Viewpoint No. 177: Income tax relief can be financed
Taxation policy could be a major campaign issue in Germany in the coming year. The CDU SME Business Union has recently called for a lowering of the income tax in Germany. Tax cuts have not played a major role in the economic and fiscal policy debates of recent years, for various reasons. Firstly, after anchoring the “debt brake” in the German constitution, the reduction in public deficits has been the focus of attention. Secondly, in recent years the debt crisis in the euro area has kept politicians on tenterhooks.
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.
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 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 No. 173: Brexit and its Economic Implications
Forecasts are notoriously difficult to make. I am nevertheless sure that Britain’s exit from the EU, the so-called Brexit, would be a bad deal both for the Brits and for the rest of the European Union.
Ifo Viewpoint No. 172: Preparing for Crises – a “Legacy” for States
A proposal put forward by the German Federal Ministry of Finance has given a boost to the negotiations between Greece, the EU Commission and the IMF. These parties could not agree on the volume of the fiscal consolidation package needed to enable Greece to meet the budget goals set by the Troika. It is not only difficult to calculate the costs of the refugee crisis. The future revenue and spending of the crisis-afflicted country are difficult to predict in any case. This led to a proposal from Berlin to approve consolidation measures in advance, which would only take effect if Greek government spending were to exceed forecasts.
Ifo Viewpoint No. 171: Accountability Bonds
Progress has been made in overcoming the economic crisis in the euro area, even though further adjustments are needed. Efforts to restructure public finances, however, are flagging and meeting with increasing political resistance. There are serious shortfalls in the governance and coordination of fiscal policy. The European Fiscal Compact stipulates that member states reduce their budget deficits towards the upper ceiling of a structural deficit (corrected for cyclical effects) of 0.5 percent of GDP. In reality, however, the structural deficits in many countries are rising. Yet no serious efforts are being made on the part of the European Commission and Council to enforce the debt rules. Implicit joint liability through the ESM and the ECB bond purchasing programmes undermines incentives for sound fiscal policies.
