Category Archives: CESIfo

18/2/16: Lack of Support for ‘Refugees –> Growth’ Link in German Survey

As a separate matter, the same survey of 'some 220' German economists by CESIfo found that...

"A relative majority (40 percent) of participants expects the asylum-seekers to have a negative impact on the country. Only 23 percent see them as benefitting the country. The remainder was undecided. The majority of German economics professors therefore do not share the optimism of the Deutsche Bank’s Chief Economist, David Folkerts-Landau. He described the flood of refugees as Germany’s biggest economic opportunity since its reunification.

The majority of economics professors (56 percent) believes that the minimum wage should be lowered to facilitate the integration of asylum-seekers with poor skills into the German labour market. 37 percent, however, does not support this view. Some economists feel that this could lead to tensions between Germans and new arrivals. “I am no advocate of the minimum wage,” writes Prof. Dr. Erwin Amann of the University of Duisburg-Essen in the survey. “But a reduction in the minimum wage would prompt a debate over German workers being crowded out,” he warns."

So much for that "Keynesian growth stimulus" from immigration, then...

18/2/16: Europe’s Problem is Not Germany…

CES-Ifo just released their survey results for the regular poll of some 220 German economists. And if you think that professionals are at any odds with Schäuble on monetary policy of the ECB, think again.

Which, of course, is absolutely correct. For German economy, ECB's policy is too loose. For French economy, about right. For Italy and Spain - probably somewhat too restrictive, although who on Earth can tell with any degree of confidence what 'about right' policy for these two can even look like...

Still, the key point remains: Euro is still a malfunctioning currency that cannot reconcile differences between various economies. In other words, Europe's problem is not Germany. It is not France, nor Spain, nor Italy. Europe's problem is not even Euro. Instead, Europe's problem is Europe.

9/11/15: Lessons from German reunification for a European Fiscal Union: Sinn

CESIfo's Hans-Werner Sinn has just torn a massive hole in the parasail of European 'federalistas' of French 'harmonise-everything' variety. His summarised view is presented here: A longer version is published by CESIfo on November 9th.

Key point in both is that "The fiscal union demanded by Hollande now is an understandable attempt to compensate for the lack of competitiveness of the southern EU countries by resorting to international transfers, but these transfers would cement their lack of competitiveness and drive Europe into permanent stagnation. The travails of German reunification should be a warning against pursuing this course."

In other words, East German experience, per Sinn, suggests that fiscal (tax and transfers) union even with debt mutualisation (aka replacing national debts with federal debt) is not a road to achieving economic convergence across the EU Member States, but a road to human capital and investment transfers from uncompetitive 'South' to competitive 'North'. In effect, dressed up as a social ills salvation, it bears a prospect of sealing tight existent competitive differentials and making 'South' a permanent dependency sub-Union.

Pretty darn tough stance.

24/6/15: Ifo Miss is Not a Biggy…

Ifo business climate index for Germany fell from 108.5 in May to 107.4 (expected 108.1) in June, while the business expectations index was down from 103 to 102 (also missing expectation for 102.5) and the current assessment index fell from 114.3 in May to 113.1 in June (missing expectations for a decline to 114.1).

For all the media chatter about missed expectations, Ifo index is trending at levels consistent with close to 3% growth and well within the range of the average for Q1 2013-Q2 2015 period.

As chart above shows, Ifo has been signalling strong growth momentum in Germany for some time now, with volatility of the index reading around period averages being less pronounced than for the euro area as a whole.

The chart also shows recent uptick in economic climate conditions in the euro area as a whole. When we look at period averages, one interesting sub-trend to watch is the step-up change in growth conditions in the euro area as opposed to highly steady growth conditions in Germany.